Moody’s dings Dongfeng

Moody’s Ratings said it lowered Dongfeng Motor Group Co. Ltd.’s issuer rating to A3 from A2 and the backed senior unsecured rating on the bonds issued by subsidiary Dongfeng Motor (Hong Kong) International Co., Ltd. to A2 from A3. The parent guarantees the bonds. The agency also downgraded Dongfeng Motor Group’s baseline credit assessment to baa3 from baa2.

The outlook remains negative.

"The downgrade and negative outlook reflect Dongfeng's significantly weakened BCA due to a material decline in its profitability and as a result, heightened leverage, which are unlikely to recover to the levels we previously expected over the next 12-18 months. The weaker than expected margin trajectory reflects intense competition in China's auto market and the company's continued investments in product development and operating expenses, including those related to new energy vehicles (NEVs)," said Gerwin Ho, a Moody's Ratings vice president and senior credit officer, in a press release.

Ho added, "Dongfeng's substantial net cash position, prudent financial management, and high level of government support could provide some buffer. The company is a central government-owned state-owned enterprise that has an established track record in the strategic automobile sector."

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