Xinjiang Guanghui Industry Investment (Group) Co. Ltd.

The negative outlook reflects Guanghui's tightening liquidity and significant refinancing needs over the next 12 months. We may lower the rating if Guanghui's liquidity further deteriorates. This could happen if: The company lacks a credible refinancing plan for its upcoming short-term maturities; or The company's banking relationships or capital market access erode such that it has limited access to long-term funding in the next three to six months. We could revise the outlook to stable if Guanghui significantly increases its operating cash flow and improves its liquidity buffer such that it can extend its debt maturity profile. This could also occur through capital injections from shareholders or asset disposals to repay debts. China GDP growth to moderate to 1.2% in

...Xinjiang Guanghui Industry Investment (Group) Co. Ltd. (Guanghui) faces significant liquidity risk due to its significant short-term maturities. At the end of the first quarter of 2020, the company had about Chinese renminbi (RMB) 71 billion of debt due in the next 12 months. This amount is much higher than its unrestricted cash and short-term investments of about RMB22 billion. A majority of these debt maturities are bank credit lines that we assume Guanghui will be able to roll over, given its sound banking relationships. We also expect the company to have ongoing access to China's onshore capital market to refinance its bullet debt. We believe business disruptions caused by COVID-19 will be temporary and moderate for Guanghui. The company's revenue declined about 27% in the first quarter of 2020 due to the business disruption from COVID-19. Guanghui's operations have recovered gradually from the second quarter of 2020. Retail sales of passenger cars in China grew about 1.8% year-on-year...

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