China Hongqiao Group Ltd. 'BB-' Rating Affirmed On Stable Profitability; Outlook Stable

Hongqiao will continue growing its aluminum capacity and cost efficiency programs over the next 12 months. We expect the China-based aluminum producer to sustain its low cost position as it ramps up production, which would support its profitability in a subdued commodity pricing cycle. However, the company's high appetite for capacity growth, which is primarily debt-funded, could challenge its ability to maintain its current cash flow leverage because the industry in China is oversupplied. We are affirming our 'BB-' long-term corporate credit rating and our 'cnBB+' Greater China regional scale rating on Hongqiao. We are also affirming our 'BB-' long-term issue rating and 'cnBB+' long-term Greater China regional scale rating on the company's senior unsecured notes. The stable outlook reflects

...+ Hongqiao will continue growing its aluminum capacity and cost efficiency programs over the next 12 months. + We expect the China-based aluminum producer to sustain its low cost position as it ramps up production, which would support its profitability in a subdued commodity pricing cycle. + However, the company's high appetite for capacity growth, which is primarily debt-funded, could challenge its ability to maintain its current cash flow leverage because the industry in China is oversupplied. + We are affirming our '##-' long-term corporate credit rating and our 'cnBB+' Greater China regional scale rating on Hongqiao. We are also affirming our '##-' long-term issue rating and 'cnBB+' long-term Greater China regional scale rating on the company's senior unsecured notes. + The stable outlook reflects our opinion that Hongqiao could maintain its profitability amid the economic slowdown in China. SINGAPORE (S&P Global Ratings) May 30, 2016--S&P Global Ratings said today that it had affirmed...

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