Moody’s could drop Beijing Enterprises

Moody's Investors Service said it placed Beijing Enterprises Holdings Ltd.'s (BEHL) A3 issuer rating and Beijing Enterprises Group (BVI) Co. Ltd.'s (BE BVI) A3 issuer rating on review for downgrade.

At the same time, the agency placed the A3 senior unsecured rating for the bonds guaranteed by BEHL or BE BVI, and issued by Mega Advance Investments Ltd., Talent Yield (Euro) Ltd., Talent Yield Investments Ltd. and Charter Style International Ltd. on review for downgrade.

"The review for downgrade is driven by BEHL's wholly-owned subsidiary, Beijing Gas Group Company Limited's 20% investment in Verkhnechonskneftegaz for $1.1 billion," Moody's vice president and senior analyst Ada Li said in a news release.

Moody's explained that Verkhnechonskneftegaz (unrated) is PJSC Oil Co. Rosneft's (Ba1 negative) natural gas field subsidiary in Serbia. It is a brown field gas field operating since 2008, with 2015 reported profit after tax of RUB 46.7 billion.

"We expect that the transaction will be mainly debt funded, which will further pressure BEHL's weak financial profile to levels that could no longer be consistent with an A3 issuer rating, especially after its €1.44 billion acquisition of EEW Holdings GmbH in March 2016," Li added in the release.

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