ASIA CREDIT-CITIC Resources' stake sale, IPO may lift rating

By Umesh Desai

HONG KONG, June 6 (Reuters) - CITIC Resources Holdings Ltd's HK$2.5 billion rights issue will improve its debt profile, but funds from selling a stake in a coal firm and listing a unit will go even further to lift its rating if used to pay down debt.

Investors are concerned that the company will spend its new funds chasing acquisitions, analysts said.

China's fourth-largest oil producer, which also has interests in aluminium, coal, manganese and the import and export of commodities, plans to raise funds via the rights offer to improve its finances and working capital and to fund future investments.

CITIC Resources' (1205.HK) bonds due in 2014 VG030176880=RRPS, rated BB-plus, yield around 7.8 percent, or 40 basis points less than the average yield for similar-rated entities, and analysts expect little upside.

"We don't see it deleveraging on a gross basis because those proceeds will be used for high capex and further acquisitions," said Mark Lo, BNP Paribas credit analyst.

But he added the rights issue will be mildly positive as net debt to EBITDA -- earnings before interest, taxes, depreciation and amortisation -- declines because of the cash infusion.

This week, Standard & Poor's and Moody's both affirmed the company's sub-investment grade rating following the rights issue, saying the infusion was not large enough to have an impact on its credit standing.

S&P analyst Lawrence Lu said the cash infusion was not being used for credit-friendly purposes, such as paying off debt, and would instead fund new projects.