S&P switches Yili view to negative

S&P said it changed the outlook for Inner Mongolia Yili Industrial Group Co. Ltd. to negative from stable and affirmed its A- ratings on the company and its senior unsecured notes.

Yili plans to buy Ausnutria Dairy Corp. Ltd. for up to RMB 11.6 billion in two phases.

“Yili's leverage could increase to 1.7x-1.9x in 2022 if the company buys 100% of Ausnutria.The acquisition, announced on Oct. 27, 2021, consists of two steps: (1) acquiring 34.3% of Ausnutria's shares for RMB 5.1 billion and (2) a general offer for the remaining shares for about RMB 6.5 billion. If Yili acquires 100% of Ausnutria and this was fully funded by debt, Yili's adjusted debt-to-EBITDA ratio would stay over 1.5x for the coming two years,” the agency said in a press release.

If so, Yili’s debt leverage could exceed the agency’s leverage threshold of 1.5x, it said.

However, S&P said Yili plans to sell RMB 12 billion in equity privately, which could help it lower leverage.

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