Fitch cuts Yunnan Provincial

Fitch Ratings said it downgraded Yunnan Provincial Investment Holdings Group Co. Ltd.’s long-term foreign- and local-currency issuer default ratings to BBB- from BBB. Fitch also downgraded the $600 million 6¼% bonds due 2022 that Yunnan guarantees to BBB- from BBB. The bonds were issued by Bi Hai Co., Ltd., Yunnan’s wholly owned offshore special-purpose entity based in the British Virgin Islands.

The downgrade follows a revised assessment of the financial implications of default to moderate, from strong, under the agency’s government-related entities rating criteria, Fitch said.

“YIG has been repositioned by Yunnan province’s State-owned Assets Supervision and Administration Commission as a “comprehensive capital-investment platform” and a “holding platform for financial assets and public-welfare assets”. The Yunnan government is supporting the expansion by injecting assets into YIG that Fitch believes are more highly commercialized compared with YIG’s existing businesses or its assets that are controlled by the government. The downward revision of YIG’s financial implications reflects a potential dilution of YIG’s control over the group’s key assets,” the agency said in a press release.

The outlook is negative.

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