Hong Kong, June 12, 2018 -- Moody's Investors Service has downgraded China Huiyuan Juice Group Limited's
B1 corporate family rating and B1 senior unsecured rating to Caa1.
The ratings outlook is negative.
This concludes the rating review initiated on 3 April 2018.
RATINGS RATIONALE
"The downgrade has been prompted by Huiyuan's announcement on regulatory
requirements before its shares can resume trading," says Lina
Choi, a Moody's Vice President and Senior Credit Officer.
"Fulfillment of these requirements will cause further delays in
the expected timeframe for the resumption of trading," adds
Choi. "These delays will in turn heighten the company's
repayment risks."
On 11 June, Huiyuan announced that the Hong Kong Stock Exchange
(HKSE) had imposed certain regulatory requirements to be fulfilled before
its shares could resume trading. These requirements include the
completion of a forensic investigation of its accounts.
The required investigation and publication of the findings will likely
lengthen the expected timeframe for the resumption of trading in the company's
shares, which may lead to a breach of the conditional waivers granted
by certain lenders for the company's loans.
Non-compliance with the conditional waiver for its loans will entitle
the relevant lenders to accelerate repayments. If this happens,
the company's liquidity position will be severely impaired.
The requirements also call for the publication of all outstanding financial
results and for Huiyuan to address any audit modifications.
On 29 March, Huiyuan announced that it had provided loans totaling
RMB4.28 billion to Beijing Huiyuan Beverage, a company owned
by Huiyuan's largest shareholder and chairman, Mr. Zhu Xinli.
The transaction was significant, but unreported.
Huiyuan also failed to make an announcement on the loan or obtain approvals
from independent shareholders. Its inaction violated several listing
rules of the HKSE.
Trading in the company's shares remains suspended. For as long
as the company cannot publish its audited 2017 financial statements,
as required by the HKSE, its funding access will be limited.
Moody's will continue to monitor the company's resolution of the HKSE
requirements and the completion of its annual results filing for 2017.
The negative ratings outlook reflects the company's high repayment risk,
due to its uncertain financial position, impaired source of funding,
and high corporate governance risk.
Given the negative outlook, there is a low probability of an upgrade
in the near term. However, the ratings could see upward pressure
in the medium term if the company fulfills its regulatory requirements
in a satisfactory manner.
Huiyuan's ratings will be downgraded further if the company fails
to repay its outstanding obligations.
The principal methodology used in these ratings was Global Soft Beverage
Industry published in January 2017. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Established in 1992 and headquartered in Beijing, China Huiyuan
Juice Group Limited (Huiyuan) is one of the major players in China's juice
market. The company has manufactured and distributed fruit juices,
vegetable juices and other beverages for more than 20 years.
It operates four major business segments — Juice Products,
Nectars, Juice Drinks and Other Beverage Products — through
subsidiaries.
The company is approximately 65.6% owned by its chairman,
Mr. Zhu Xinli. In May 2013, Huiyuan completed the
acquisition of the entire share capital of China Huiyuan Industry Holdings,
an upstream juice puree and concentrates producer previously owned by
its chairman.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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.
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
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
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