Hong Kong, October 30, 2019 -- Moody's Investors Service ("Moody's") has assigned a Ba2 senior unsecured
rating to the Eurodollar notes to be issued by Fortune Star (BVI) Limited,
and unconditionally and irrevocably guaranteed by Fosun International
Limited (Fosun, Ba2 stable).
The rating outlook is stable.
Fosun plans to use the proceeds of the proposed notes to refinance existing
debt and for working capital and general corporate purposes.
RATINGS RATIONALE
"The proposed notes will not materially affect Fosun's financial
profile," says Lina Choi, a Moody's Senior Vice
President and Moody's International Lead Analyst for Fosun.
Moody's expects Fosun's market value-based debt leverage
(MVL) will reach 40% over the next 12-18 months, and
adjusted (funds from operations [FFO] + interest)/interest coverage
below 0.2x over the same period.
Moody's expects the company will be cautious in its investments
over the next 12-18 months, given the uncertain global economic
environment. Such a slowdown in the company's investments
would however also help reduce its debt leverage.
The Ba2 rating on the proposed notes incorporates Moody's view that despite
Fosun's status as a holding company, with the majority of the group's
claims at the operating subsidiary level, the group's diversified
business profile — with cash flow generation across a large number
of operating subsidiaries and investees in its investment portfolio with
a global presence — mitigates structural subordination risks.
Fosun's Ba2 corporate family rating reflects its (1) large and diversified
investment portfolio; (2) proven investment track record; and
(3) holdings of substantial amount of marketable securities.
However, the rating is constrained by Fosun's (1) high investment
appetite, and (2) weak interest coverage at the holding company
(holdco) level.
Fosun's liquidity is weak at the holding company level. Its
dividends and income are inadequate to cover interest and operating expense
and its high amount of short-term debt. However, this
liquidity risk is somewhat mitigated by the holding company's investment
portfolio that provides a partial buffer to refinance short-term
debt.
In terms of environmental, social and governance (ESG) factors,
Fosun's key businesses -- insurance, consumer,
pharmaceuticals and fashion -- are exposed to social risks arising
from potential changes in customer relations, and demographic and
societal trends.
In response to these risks, Fosun established a ESG Committee in
March 2019. The committee is supported by six departments and the
Board Secretary to oversee the implementation of the company's ESG
vision, strategies and policies.
In addition, the company's ownership is concentrated in its
chairman, Mr. Guangchang Guo, who owned 60.3%
of the company at the end of June 2019. Moreover, while the
company has a complex and evolving investment portfolio, limited
transparency exists around its investments for public investors.
These risks are partially mitigated by the company's listing on
the Hong Kong Stock Exchange, and by the presence on its 12-member
board of directors of five independent non-executive directors.
Furthermore, the company has provided regular training to its directors,
and has an audit committee, renumeration committee and nomination
committee in place to support the functioning of the board.
The stable rating outlook reflects Moody's expectation that the
company will (1) pursue its stated business strategies; (2) refrain
from aggressive debt-funded acquisitions; and (3) maintain
its good access to the debt capital markets to refinance maturing debt.
The rating could be upgraded if (1) the company's business profile
improves, with more stable core businesses; (2) [dividends
+ interest income]/[interest + operating expenses coverage]
rises above 1.5x at the holding company level; and (3) its
liquidity position strengthens.
On the other hand, downward rating pressure could arise if (1) its
financial profile deteriorates, with its adjusted MVL rising above
40%-45% or its consolidated adjusted debt/capital
staying rising above 55%-60% for a prolonged period;
(2) the quality of its investment portfolio deteriorates or contagion
risk from its investees rises; or (3) the company increases its reliance
on short-term funding.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was Investment Holding Companies
and Conglomerates published in July 2018. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
COMPANY PROFILE
Fosun Group was founded in 1992. Fosun International Limited (Fosun),
the holding company of Fosun Group, is headquartered in Shanghai
and listed on the Hong Kong Stock Exchange in 2007.
Fosun has diversified businesses spanning three broad categories:
(1) integrated finance (Wealth); (2) tourism, leisure,
consumer (Happiness); (3) and Pharmaceuticals, medical services,
health products (Health).
The estimated market value of Fosun's investment portfolio totaled around
RMB 229 billion at the end of 2018. The consolidated group's revenue
totaled RMB109 billion in 2018.
At 30 June 2019, Fosun was 60.3% beneficially owned
by its chairman and co-founder, Mr. Guangchang Guo.
The local market analyst for this rating is Elaine Lai, +86
(212) 057-4018.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. Unless
noted in the Regulatory Disclosures as a Non-Participating Entity,
the rated entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of
its ratings process. Please refer to www.moodys.com
for the Regulatory Disclosures for each credit rating action under the
ratings tab on the issuer/entity page and for details of Moody's
Policy for Designating Non-Participating Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Lina Choi
Senior Vice President
Corporate Finance Group
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
Gary Lau
MD - Corporate Finance
Corporate Finance Group
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
