Hong Kong, June 23, 2020 -- Moody's Investors Service has downgraded Hilong Holding Limited's
corporate family and senior unsecured ratings to Caa3 from B3, and
the rating on Hilong's proposed senior secured notes to Caa3 from B3.
The outlook has been changed to negative from ratings under review.
This rating action concludes the review for downgrade initiated on 9 June
2020, following Moody's increased concerns over Hilong's heightened
refinancing risk.
RATINGS RATIONALE
The downgrade follows the announcement on 22 June 2020 that Hilong will
not repay its outstanding USD165 million senior notes maturing 22 June
2020 (2020 notes), given its inability to complete its tender offer.
Today's action also reflects Hilong's poor financial management
as a governance consideration, given its potential debt restructuring
and inability to complete its refinancing.
Hilong also announced it will extend the expiration deadline for its exchange
offer to 29 June, given its inability to fulfil the acceptance conditions
to date. Moody's considers Hilong's extended debt exchange offer
as a way to avoid default. The offer can therefore be viewed as
a distressed exchange, which is a default under Moody's definition.
Hilong's Caa3 ratings reflect Moody's view of a low recovery on
Hilong's debt, given the probable lower asset valuation amid
low oil prices. The ratings also reflect Moody's expectations
of potential debt restructuring and cross default triggered for its USD200
million senior notes due September 2022.
The negative outlook reflects the potential for losses post-restructuring
to exceed Moody's current expectation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if recovery prospects for lenders deteriorate
further.
The ratings could be upgraded once a clear restructuring plan is announced
that improves the company's recovery and liquidity position.
The principal methodology used in these ratings was Global Oilfield Services
Industry Rating Methodology published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062654.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Hilong Holding Limited is an integrated oilfield equipment and services
provider. The company's four main businesses are (1) oilfield equipment
manufacturing and services, (2) line pipe technology and services,
(3) oilfield services, and (4) offshore engineering services.
The company listed on the Hong Kong Stock Exchange in 2011. Jun
Zhang, the chairman and founder of the company, is the controlling
shareholder, with a 58.7% equity interest as of the
end of 2019.
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
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rating assigned, and in relation to a definitive rating that may
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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.
Chenyi Lu
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
