Moody's lowers Xinao

Moody's Investors Service said it has downgraded to Ba2 from Ba1 of Xinao Gas Holdings' senior unsecured bond rating.

At the same time, Moody's said it has affirmed the company's corporate family rating at Ba1.

The outlook is stable.

"The downgrade of the bond rating mainly reflects structural subordination risk as Xinao's subsidiary debt to total debt and total asset has shown an increasing trend in the past few years and is above 75% and 30% respectively as of 1H2008," said Jennifer Wong, Moody's lead analyst for the company, adding, "Moody's considers such high level of subsidiary debts would impair the priority of claims for the senior unsecured bondholders at the holding company."

"Although Xinao has indicated its intention to lower subsidiary level debt, given its reliance on on-shore borrowings at the subsidiary or project level to fund its operations in China, such ratios are likely to remain at a high level in the next year or two," added Wong.

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