Hong Kong, April 06, 2020 -- Moody's Investors Service has downgraded CAR Inc.'s (CAR)
corporate family rating (CFR) and senior unsecured rating to B2 from B1,
and has placed the ratings on review for further downgrade.
The outlook is changed to ratings under review from negative.
The rating action follows the 2 April 2020 announcement by Luckin Coffee
Inc. on an internal investigation into misconduct, including
fabricated transactions[1]. The chairman of Luckin Coffee's
board of directors, Charles Zhengyao Lu, is also the chairman
of the board of CAR.
RATINGS RATIONALE
"The downgrade and review for further downgrade reflect our concern that
Luckin Coffee's announcement could impair CAR's access to
funding and operations," says Gerwin Ho, a Moody's Vice President
and Senior Credit Officer.
The action also factors in the potential challenge facing CAR's
senior management in implementing its corporate strategy, since
Luckin Coffee and CAR share the same chairmanship.
CAR's liquidity position is already weak, and is particularly
vulnerably given the current challenging operating and funding environment.
Moody's credit assessment also takes into account the following
environmental, social and governance (ESG) considerations.
Moody's regards the coronavirus outbreak as a social risk under its ESG
framework, given the substantial implications for public health
and safety. Today's action reflects the impact on CAR of the breadth
and severity of the shock, and the broad deterioration in credit
quality and shifts in market sentiment it has triggered.
Independent directors make up a minority of CAR's board, although
the company is a listed and regulated entity. The company also
has a diversified shareholder base that includes major shareholders such
as Legend Holdings Corporation. Nevertheless, today's
action factors in potential governance concerns given the common chairmanship
of Luckin Coffee and CAR.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's review will focus on the impact of Luckin Coffee's
announcement on CAR's reputation, and in turn on the company's
access to funding and its business operations.
The principal methodology used in these ratings was Equipment and Transportation
Rental Industry published in April 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1061773.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
CAR Inc., founded in 2007 and headquartered in Beijing,
provides car rental services, including car rentals and fleet rentals
in China. CAR listed on the Hong Kong Stock Exchange in September
2014.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
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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
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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.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating outcome
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
REFERENCES/CITATIONS
[1] Luckin Coffee press release 02-Apr-2020
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.
Gerwin Ho
VP - Senior Credit Officer
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
Clement Cheuk Yiu Wong
Associate Managing Director
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
