TEXT-S&P Rates CITIC Pacific's MTN Program, Proposed Notes 'BB+'
(The following was released by the rating agency)
HONG KONG (Standard & Poor's) Oct. 8, 2012--Standard & Poor's Ratings Services today assigned its 'BB+' rating to an upsized US$4.5 billion medium-term notes program of CITIC Pacific Ltd. (BB+/Negative/--; cnBBB/--). The original size of the program was US$2.0 billion. At the same time, we assigned our 'BB+' issue rating to a proposed benchmark size senior unsecured notes issuance under this program. We have also assigned our 'cnBBB' Greater China regional scale rating to both the program and the proposed notes. We expect CITIC Pacific to use the proceeds from the proposed notes to refinance borrowings due in 2013.
We anticipate that the company's debt will increase by the end of 2012, with its ratio of total debt to total capital reaching close to 60% as it pre-finances debt maturities in 2013. In our view, the key risk to the rating on CITIC Pacific remains the execution of the construction of the Sino Iron project in Western Australia and whether the company can start the first production line soon.
The rating on CITIC Pacific reflects the conglomerate's weak execution record. The company's highly leveraged capital structure and its exposure to cyclical industries such as iron ore, real estate, and special steel also constrain the rating. Strong parent support and CITIC Pacific's diversified assets across industries temper these weaknesses.
RELATED CRITERIA AND RESEARCH
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
-- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
-- Rating Methodology For European Investment Holding And Operating Holding Companies, May 28, 2004
Keywords: MARKETS RATINGS CITICPACIFIC