Moody’s downgrades Weibo

Moody’s Investors Service said it downgraded Weibo Corp.’s issuer and senior unsecured ratings to Baa2 from Baa1. At the same time, Moody’s revised the outlook to negative from stable.

Sina Corp. announced in a Sept. 28 SEC filing that it agreed to be privatized by New Wave Holdings Ltd., a company controlled by its Chairman and CEO Charles Chao. The transaction, which values Sina at $2.59 billion, will be majority funded by debt, Moody’s said.

The transaction requires approval from two-thirds of the company’s shareholders.

“The downgrade reflects the more aggressive financial policy at Weibo’s controlling shareholder and parent, Sina, as demonstrated by Sina’s proposed debt-funded privatization,” said Lina Choi, a Moody’s senior vice president, in a press release.

Sina and Weibo are closely linked, with Weibo accounting for most of its parent’s assets and earnings. The substantial use of debt deviates from Moody’s expectation of prudent financial management and could affect corporate governance at both Sina and Weibo, the agency said.

“The negative outlook reflects the potential further drag on Weibo from Sina’s weakened credit profile if the transaction is completed, considering the parent’s elevated leverage, reduced transparency, and uncertainty around its ability to deleverage in the next two years,” added Choi.

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