Moody's cuts Kunming Rail

Moody's Investors Service said it assigned a Ba1 corporate family rating to Kunming Rail Transit Group Co., Ltd. (KRT) and withdrew the company's Baa3 issuer rating. The agency also downgraded to Ba1 from Baa3 the senior unsecured rating on the company’s dollar-denominated bonds.

The outlook is negative. This rating action concludes the review for downgrade started on June 29, Moody’s said.

"The rating downgrade reflects KRT's continued diminishing access to funding alongside further deterioration in the regional funding environment. In addition, the lack of significant improvement in sufficiency and timeliness of government support exacerbates the company's liquidity pressure," said Stephen Tang, a Moody's assistant vice president and analyst, in a press release.

"We acknowledge Kunming Rail's strategic significance as the provincial capital's metro owner and operator with the high willingness of Kunming city government to extend direct financial support, or indirect support. However, such efforts are unlikely to fully offset KRT's weak liquidity buffer and investors' aversion toward local government financing vehicles in the region," added Tang.

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