Bulletin: Ratings On Chinese Engineering And Construction Companies Unaffected By Fall In Renminbi

HONG KONG (Standard&Poor's) Jan. 18, 2016--The steep fall in the Chinese renminbi (RMB) in recent months is unlikely to affect the financial leverage and credit profiles of Chinese engineering and construction (E&C) companies. This is because foreign currency debt only accounts for a small portion of the total debt for most of these companies. Chinese E&C companies mostly rely on domestic bank borrowings for their operational and project needs. Our stress test considers two scenarios: (1) the renminbi depreciates 10% from mid-2015 level and the U.S. Federal Reserve hikes interest rates by 100 basis points (bps) over the next 24 months; and (2) the renminbi depreciates by 20% and the Fed raises interest rates by 200 bps. The

...HONG KONG (Standard & Poor's) Jan. 18, 2016--The steep fall in the Chinese renminbi (RMB) in recent months is unlikely to affect the financial leverage and credit profiles of Chinese engineering and construction (E&C) companies. This is because foreign currency debt only accounts for a small portion of the total debt for most of these companies. Chinese E&C companies mostly rely on domestic bank borrowings for their operational and project needs. Our stress test considers two scenarios: (1) the renminbi depreciates 10% from mid-2015 level and the U.S. Federal Reserve hikes interest rates by 100 basis points (bps) over the next 24 months; and (2) the renminbi depreciates by 20% and the Fed raises interest rates by 200 bps. The currency has weakened by 6% against the U.S. dollar since August 2015. For the E&C companies that we rate in China, the financial leverage (measured by the ratio of debt to EBITDA) increases on average by merely 0.1x over the next two years in scenario 1, and only...

Bulletin