Hong Kong, December 24, 2020 -- Moody's Investors Service has downgraded the corporate family rating (CFR)
of GCL New Energy Holdings Limited to Caa2 from Caa1. At the same
time, Moody's has downgraded to Caa3 from Caa2 the senior unsecured
rating on the USD notes issued by GCL New Energy.
At the same time, Moody's has placed the ratings on review for further
downgrade.
The outlook was changed to ratings under review from negative.
RATINGS RATIONALE
"The downgrade reflects GCL New Energy's proposed distressed exchange
for its US dollar notes," says Ivy Poon, a Moody's Vice President
and Senior Analyst.
On 23 December, GCL New Energy proposed an exchange offer for its
existing $500 million USD notes with 7.1% issued
in 2018 and maturing in January 2021. The new notes, due
in January 2024, will bear a 9.75% coupon rate per
annum and include terms for mandatory redemption upon receipt of renewable
energy subsidies and significant asset sales.
Moody's considers GCL New Energy's exchange offer as a way
to avoid default under the current existing notes. As such,
Moody's views this offer as a distressed exchange, which is
a default under Moody's definition.
The recovery prospects of USD noteholders are highly uncertain because
of GCL New Energy's limited cash sources and its weak access to
funding to repay the existing notes. The timing and amount of any
renewable subsidies, and of any proceeds from assets disposals,
are also uncertain, given the company's current distressed
situation.
GCL New Energy's Caa2 CFR reflects its very weak liquidity and high
refinancing risk for its maturing debt over the next 12-18 months.
The Caa3 senior unsecured rating takes into consideration the high structural
and legal subordination risk for USD noteholders, which negatively
affects recovery prospects.
The rating action also considers governance risks of GCL New Energy due
to its aggressive financial policy to expand and invest solar projects
in China, resulting in heavy debt burden and tight liquidity shortfall.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's review will focus on: (1) the progress of the exchange offer;
(2) the progress of asset disposals and associated receipts; (3)
the receipt of subsidies for GCL New Energy's solar projects; and
(4) GCL New Energy's liquidity profile and access to funding.
Upward ratings pressure is unlikely, given the ratings are under
review for downgrade. The outlook on the ratings could return to
stable if the company successfully refinances its maturing debt and introduces
other countermeasures to ease liquidity pressure.
The company's ratings could be further downgraded in the near term if
its liquidity profile further deteriorates which potentially lower recovery
prospect.
The principal methodology used in these ratings was Unregulated Utilities
and Unregulated Power Companies published in May 2017 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1066389.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Listed on Hong Kong Stock Exchange, GCL New Energy Holdings Limited
is a solar power generation company in China. The company's installed
capacity totaled 7.0GW as of 30 June 2020.
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.
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Ivy Poon
Vice President - Senior Analyst
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: 61 2 9270 8141
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
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Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
