Moody’s downgrades Baosteel

Moody's Investors Service said it downgraded the issuer ratings of Baosteel Group Corp. and its flagship subsidiary, Baoshan Iron & Steel Co., Ltd., to Baa1 from A3.

At the same time, the agency downgraded the following ratings:

• The senior unsecured rating on the bonds issued by Baosteel to Baa1 from A3;

• The issuer rating of Baosteel Resources International Co. Ltd., a wholly owned subsidiary of Baosteel, to Baa2 from Baa1;

• The rating on the dollar-denominated bond issued by Baosteel Financing 2015 Pty Ltd., a wholly owned subsidiary of Baosteel Resources, to Baa2 from Baa1. The bond is guaranteed by Baosteel Resources and supported by Baosteel through a keepwell agreement; and

• The rating on the dollar- and euro-denominated bond issued by Bao-Trans Enterprises Ltd., a wholly owned subsidiary of Baoshan Iron, to Baa2 from Baa1. The bond is supported by Baoshan Iron through a keepwell agreement.

The outlook on all the ratings is negative. This concludes the review for downgrade initiated on Feb. 19.

Moody’s said the downgrade primarily reflects: (a) Baosteel's weakened operating performance and financial profile, given persistent steel oversupply, low steel prices and substantial losses at two of its steel subsidiaries; and (b) the group's high consolidated leverage of 5.7 times in 2015, and Moody's expectation that its leverage will further weaken to around 6 times in 2016.

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