Fitch cuts Honghua, debt to CCC

Fitch Ratings said it downgraded Honghua Group Ltd.’s long-term issuer default rating and senior unsecured rating to CCC from B-.

The recovery rating on the debt is RR4.

No outlook was assigned to the issuer default rating.

Fitch said the downgrade reflects substantial weakness in operations and financials in a sharp industry downturn.

The company failed to unlock cash from working capital to reduce debt as revenue dropped dramatically.

Operational scale has shrunk rapidly due to muted demand, and is not likely to recover under current market conditions, the agency added.

Liquidity is not an immediate issue, but Fitch said the company has on offshore bond due in 2019, which may be difficult to refinance without significant recovery in the oil and gas exploration industry.

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