Moody’s cuts Lanzhou Construction

Moody’s Investors Service said it cut Lanzhou Construction Investment (Holding) Group Co., Ltd.’s issuer rating and the bonds issued by City Development Co. of Lan Zhou and guaranteed by Lanzhou Construction to Ba1 from Baa3. The agency also cut changed the outlook to negative from under review.

The downgrades and outlook revision conclude the review for downgraded started on Sept. 30, the agency said.

"The downgrade reflects the company's weakened funding access, its large amount of debt coming due over the next 12 months and the tightened funding environment for issuers from fundamentally weak regions, which we expect will continue for a period of time," said Ying Wang, a Moody's vice president and senior analyst, in a press release.

"We recognize the government's efforts and plans to support the company's debt repayment, including facilitating coordination with banks and other financial institutions for such purpose, which will help alleviate the company's funding pressure and liquidity risks in the next three to six months. However, such efforts are unlikely to fully offset the negative impact of tightened regulatory supervision over local government financing vehicles' (LGFVs) borrowing and investors' aversion toward LGFVs in less-developed regions. As a result, Lanzhou Construction's funding access and liquidity profile no longer support its investment-grade rating," added Ying.

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