Hong Kong, January 20, 2020 -- Moody's Investors Service says that Panda Green Energy Group Limited's
(Panda Green) partial completion of a $350 million exchange offer
and additional note issuance have no immediate impact on its Caa1 corporate
family rating (CFR) and the Caa2 senior unsecured rating on its $350
million bond due 25 January 2020.
The ratings remain on review with direction uncertain.
Panda Green on 15 January 2020 announced the exchange of $108 million
-- or 30.85% -- of the principal of its 8.25%
$350 million notes due 25 January 2020, for new $112
million 8% two-year notes.
Subsequently on 17 January 2020, Panda Green announced the issuance
of $260 million 8% two-year notes to two entities
that are related to Panda Green's largest shareholder.
The partial exchange offer and new note issuance are expected to be completed
by 22 January 2020, subject to regulatory clearance and covenant
compliance.
"The ratings remain unchanged, because the exchange offer result
and additional note issuance enhance Panda Green's liquidity and
the recovery prospects on its $350 million bond, a few days
before the bond's maturity," says Ada Li, a Moody's
Vice President and Senior Credit Officer.
"However, the exchange offer constitutes a distressed debt
exchange, which we regard as an event of default," adds
Li.
Moody's will continue to review the ratings. Any improvement
in Panda Green's credit profile will hinge on its ability to complete
the partial exchange offer and the $260 million notes issuance,
and to conclude the proposed investment by Beijing Energy Holding Co.,
Ltd. (BEH, A3 stable).
To the extent that the BEH investment is completed, the review will
also consider BEH's strategy for Panda Green, including any credit
enhancement and deleveraging plans.
Additionally, the review will consider any other contingency plans
that Panda Green may develop if the proposed transactions do not proceed
as announced.
Moody's placed Panda Green's ratings on review on 21 November 2019,
following the announcement that it had entered into a subscription agreement
with BEH, whereby BEH will subscribe to up to 32% of Panda
Green's shares for HKD1.79 billion (approximately $230 million)
in cash. As part of the transaction, BEH's subsidiaries and
affiliates also plan to provide a RMB8 billion-RMB10 billion credit
enhancement guarantee to Panda Green to reduce the latter's financing
costs.
The BEH investment is subject to satisfactory legal and financial due
diligence, approval by the Beijing State-Owned Assets Supervision
and Administration Commission (SASAC) and consent from the Beijing Development
and Reform Commission, as well as other regulatory clearances.
If uncompleted, the proposed investment will expire on 31 March
2020.
Panda Green's Caa1 CFR reflects the company's high refinancing pressure
and reliance on substantial external funds to cover its funding needs.
It has insufficient cash on hand and operating cash flow to cover its
repayments coming due over the next 12 months.
Moody's expects Panda Green's financial metrics will remain weak if it
is unable to reduce its financing costs, with funds from operations
(FFO) to debt likely to stay around 3% and FFO interest coverage
((FFO+interest)/interest) likely to register around 1.5x in
2020.
In terms of environmental, social and governance (ESG) factors,
Panda Green faces elevated governance risk, considering its evolving
ownership profile and changing management. Panda Green's former
CEO stepped down in May 2019 following the completion of a major equity
placement in March 2019. Uncertainty remains around potential further
changes to Panda Green's management and strategy if the BEH investment
proceeds.
Panda Green Energy Group Limited engages in the development, investment,
operation and management of solar power plants and other renewable energy
projects. At 31 December 2018, the company reported 2.3
gigawatts of gross installed capacity through its subsidiaries,
associates and joint ventures.
Listed on the Hong Kong Stock Exchange, the company's major shareholders,
as of 30 June 2019, were: (1) China Merchants New Energy Group
(CMNE) and parties acting in concert with CMNE (22.75%),
(2) Qingdao City Construction Investment (Group) Co. Limited (19.99%),
and (3) China Huarong Asset Management Co., Ltd. (A3
stable, 19.99%).
Beijing Energy Holding Co., Ltd. (BEH) is the largest
power producer and district heating supplier for the Beijing municipality.
The company mainly engages in power generation across China and district
heating in the Beijing municipality, with a total installed capacity
of 22.4 gigawatts (GW) at the end of 2018.
BEH is wholly owned by the Beijing State-owned Capital Operation
and Management Center (BSCOMC, A1 stable), which in turn is
100% owned by the Beijing municipal government and supervised by
the Beijing State-owned Assets Supervision and Administration Commission
(SASAC).
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Ada Li
VP - Senior Credit Officer
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077