Moody’s reviews Baosteel, Baoshan

Moody's Investors Service said it placed the A3 issuer ratings of Baosteel Group Corp. and its flagship subsidiary, Baoshan Iron & Steel Co. Ltd. (BISC) on review for downgrade.

At the same time, the agency placed the A3 senior unsecured rating on the bonds issued by Baosteel and the Baa1 backed senior unsecured rating to the bond issued by Bao-Trans Enterprises Ltd., a wholly owned subsidiary of Baoshan Iron, and supported by Baoshan Iron through a keepwell agreement, on review for downgrade.

Moody's continues to review the following ratings for downgrade: the Baa1 issuer rating on Baosteel Resources International Co. Ltd., a wholly owned subsidiary of Baosteel, and the Baa1 backed senior unsecured rating on the dollar-denominated bond issued by Baosteel Financing 2015 Pty Ltd., a wholly owned subsidiary of Baosteel Resources. The bond issuance is guaranteed by Baosteel Resources and supported by Baosteel through a keepwell agreement.

"The rating actions are triggered by the expected deterioration in Baosteel and BISC's earnings and debt leverage, given the adverse operating environment evident for the steel industry in China," Franco Leung, Moody's vice president, senior analyst and international lead analyst for Baosteel, said in a news release.

Based on Moody's estimation, Baosteel's earnings deteriorated substantially in 2015 and should stay depressed over the next 12 to 18 months, as the domestic oversupply situation worsens amid falling steel consumption, compounded by assets impairments and foreign-exchange losses.

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