Moody's slices New Oriental

Moody's Investors Service said it downgraded New Oriental Education & Technology Group Inc.'s issuer and senior unsecured bond ratings to Baa3 from Baa1. The agency also revised the outlook to negative from stable.

On Saturday, the general office of the CPC Central Committee and the general office of the state council announced the opinions concerning reducing students' burden and the after-school tutoring sector in China. On Sunday, New Oriental said it is considering appropriate compliance measures to be taken, and expects such measures to hurt its after school tutoring services related to academic subjects in China's compulsory education system, the agency said.

"The downgrade to Baa3 reflects New Oriental's significantly weaker business profile as a result of a regulatory change and implementation, which could materially worsen New Oriental's operating model, operations, business expansion, and capital-raising ability. These factors position the company at the low Baa rating category," said Shawn Xiong, a Moody's assistant vice president and analyst, in a press release.

"The negative outlook reflects the risk a material deterioration could occur in its future operating performance and credit metrics over the next 12 to 18 months, though partially tempered by its excellent liquidity with a solid net cash position," added Xiong.

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