Chinese firm on ratings watch after Sri Lanka deal | Daily News

Chinese firm on ratings watch after Sri Lanka deal

The Chinese state-owned company which entered into a partnership with Sri Lanka on managing the Hambantota port has been put on a ratings watch after the 1.12 billion dollar deal.

The move by the international rating agency, Standard and Poor’s (S&P), suggests the port deal could have negative financial implications for China Merchants, although it could be favourable for Sri Lanka.

“S&P places ‘BBB+’ long-term corporate credit rating on China Merchants Port Holdings on watch with negative implications,” it said. The ratings agency says the Hambantota port investment by China Merchants could weaken its leverage if funded by additional debt or cash on hand.

S&P aims to resolve the ratings watch once clarity is given on transaction and financing arrangements, Bloomberg reported.

Outlook on corporate credit rating has been negative since June 2016 because aggressive acquisition appetite has significantly increased China Merchants’ debt leverage over the past two years.

“Could lower rating by one notch if the company’s leverage increases due to the transaction.”

Another ratings agency, Moody’s in its latest report said the Hambantota deal was credit position for Sri lanka and could help the country attract more direct foreign investments and boost its foreign reserves.


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