S&P lifts Shanghai Huayi view to positive

S&P said it revised the outlook on Shanghai Huayi (Group) Co. and Huayi Group (Hong Kong) Ltd.to positive from stable.

The agency also said it affirmed the BBB- long-term issuer credit rating on Shanghai Huayi.

S&P also affirmed the the long-term issuer credit rating on Huayi HK and long-term issue rating on the outstanding senior unsecured notes that Huayi HK guarantees at BB+.

The outlook is positive.

Shanghai Huayi's financial leverage has improved significantly in the past 12 months due to strong operating cash flows, supported by higher prices, S&P explained.

The agency said it expect the company's leverage to remain lower than 3x in the next two years, owing to disciplined capital spending, even though profitability will come down slightly.

S&P also said it expects Huayi HK to remain a highly strategically important subsidiary of Shanghai Huayi.

The positive outlook reflects an expectation that Shanghai Huayi will maintain its ratio of debt-to-EBITDA of less than 3x over the next 24 months, despite likely weaker EBITDA margin, the agency said.

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