Fitch cuts Yuhuang Chemical to RD

Fitch Ratings said it downgraded Shandong Yuhuang Chemical Co., Ltd.'s long-term issuer default rating to RD from CC. Fitch also downgraded the senior unsecured rating and Yuhuang's senior unsecured U.S. dollar notes due 2020 to C. The RR4 recovery rating is unchanged. The notes were sold by its offshore special purpose vehicle Rock International Investment Inc. and guaranteed by Yuhuang.

“The downgrade is driven by Yuhuang's failure to pay holders of CNY 500 million of domestic bonds, who could exercise options to redeem them at end-November 2019,” said Fitch in a press release.

Almost all the holders of the CNY 500 million of domestic bonds exercised their put options. The company was supposed to pay the principal Nov. 21, but there has not been a public announcement from the stock exchange on repayment. As a result, Fitch said it considers a de-facto default has occurred.

Yuhuang also has another CNY 500 million bond puttable in mid-December and $300 million of bonds due in March 2020. “Yuhuang does not have internal resources to repay the bonds. Given the default on the domestic bond, refinancing from capital markets or other financial institutions is not possible. The company will have to undergo some form of debt restructuring for the maturing bonds,” said Fitch.

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