Fitch: Kangde Xin notes BB

Fitch Ratings said it assigned long-term foreign-currency issuer default rating and senior unsecured rating of BB to Kangde Xin Composite Material Group Co., Ltd.

The outlook is stable.

Fitch also said it assigned an expected BB rating to Top Wise Excellent Enterprise Co., Ltd.'s proposed dollar-denominated senior notes.

Top Wise Excellent Enterprise is a fully owned subsidiary of Kangde Xin, which unconditionally and irrevocably guarantees the notes.

The notes are rated as the same level as Kangde Xin’s senior unsecured debt rating as they represent direct, unconditional, unsecured and unsubordinated obligations, Fitch said.

The company operates in fragmented markets and has relatively small market shares, which affects the ratings, the agency said.

This is mitigated by the company’s focus on mid- to high-end products and strong relationships with its customers, which allows for moderate bargaining power, Fitch said.

The company’s free cash flow is expected to remain negative in the medium term because of its long-trade receivable days, high capital expenditure and weaker operating EBITDA margin, the agency said.

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