S&P: China Automation notes B+

Standard & Poor’s said it assigned a B+ long-term issue rating and cnBB long-term Greater China regional scale rating to the issue of $30 million senior unsecured notes due 2018 that China Automation Group Ltd. will unconditionally guarantee.

China Automation will maintain its obligation as a guarantor in a default or event of default until payment of notes in a full and timely manner, S&P said.

Tri-Control Automation Co. Ltd., an offshore subsidiary of China Automation, will issue the notes.

The rating on the notes was equalized to the long-term corporate credit rating on China Automation, the agency said. Structural subordination risks are mitigated by a number of factors, including the group’s diverse assets and businesses, S&P said.

The proceeds will be used to partially redeem the company’s outstanding $72 million senior unsecured notes due April 20, 2016.

The ratings also reflect the company’s high client concentration in the petrochemical business and its aggressive debt leverage position, intensifying competition and volatility in the industry’s capital expenditure cycle, the agency said.

The company also has shown commitment to early redeem and refinance its outstanding senior unsecured notes due April 20, 2016, S&P said.

Although management has a clear timeline to secure funding for the refinancing and repayment of its notes, the agency said it believes the company is still exposed to some execution risk.

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