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Fitch puts Yuexiu Transport on watch
Fitch Ratings said it placed on rating watch negative Yuexiu Transport Infrastructure Ltd.'s long-term foreign- and local-currency issuer default ratings and its senior unsecured rating of BBB-. Fitch simultaneously placed on RWN the BBB- rating on Famous Kind International Ltd.'s $1 billion medium-term note program.
The rating action follows the Chinese authorities' decision to suspend toll collections for the road network in the country. The toll suspension is part of the government's efforts to expedite resumption of business and recovery of supply chains in the wake of the coronavirus outbreak.
The ministry of transport said the suspension took effect from midnight on Feb. 17 and will remain in place until the end of coronavirus containment measures in China. This policy will reduce the company's revenue and lead to an increase in the company's leverage and slow down the company's deleveraging. The effect will depend on the duration of the toll-free policy, and the value and timing of the compensation to be provided by the government, all of which remain unclear now, Fitch said.
The ministry indicated some sort of compensation will be available to the toll-road operators following the suspension.
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