August 25, 2017 / 8:46 AM / 10 months ago

Fitch Affirms Bright Food Group at 'A-'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG/SHANGHAI, August 25 (Fitch) Fitch Ratings has affirmed China-based Bright Food (Group) Co., Ltd.'s (BFG) Long-Term Issuer Default Rating (IDR) at 'A-'. The Outlook is Stable. Fitch has also affirmed the company's senior unsecured rating and the ratings of all outstanding bonds at 'A-'. A full list of rating actions is at the end of this release. Fitch rates BFG by notching down from Shanghai's State-Owned Assets Supervision and Administration Commission (Shanghai SASAC), given the strong linkage between the two. BFG is Shanghai's largest vertically integrated agricultural and food product supplier and is ultimately 100% owned by Shanghai SASAC. KEY RATING DRIVERS Pivotal Policy Role Intact: Fitch sees BFG maintaining its pivotal policy role as the company and its subsidiaries store 100% of Shanghai's edible oil reserves, 85% of its policy grain reserves, and supply 45% of the municipality's vegetable and edible agricultural produce. Fitch also believes BFG has an indispensable task in safeguarding the city's food quality and as more food-safety regulations are enacted, BFG will solidify its policy role in the industry. Direct Government Support: BFG has consistently enjoyed direct financial support in the form of government grants, equity injections and land injections. The company received annual government grants of CNY723 million, CNY2.4 billion and CNY2.6 billion in 2014, 2015 and 2016, respectively. The Shanghai government also made a total equity injection of CNY1.94 billion in the past three years and transferred land assets worth CNY10.8 billion in the past two years. M&A Slowdown, Consolidation Continues: BFG has been acquiring overseas food companies in the last few years but recently sold its 60% stake in Weetabix Limited in 2017 for net proceeds of about GBP840 million. The management said BFG is now committed to integrating the companies it has acquired and to lowering the company's leverage. In addition, Shanghai SASAC injected Shanghai Fisheries Group Co., Ltd into BFG in May 2017. The slowdown in M&A activity and the further integration of BFG's overseas assets are likely to help BFG improve its operational performance and gradually stabilise leverage. Fitch considers the asset injection of Shanghai Fisheries into BFG as further evidence of Shanghai SASAC's intention to make BFG the main food provider among Shanghai's state-owned companies. Controllable Leverage, Moderate Coverage: Fitch expects BFG's leverage to remain high but relatively controlled at around 6x in the next few years as a result of fluctuations in working capital, continued capital expenditure and gradual improvement in funds from operations (FFO). BFG's leverage - measured by FFO adjusted net leverage - remained high at 6x at end-2016 as the result of its large international acquisitions of food companies. BFG's fixed charge coverage was moderate at around 2x as it has low debt financing cost, a benefit from its status as a state-owned enterprise (SOE) and its solid bank relationships. DERIVATION SUMMARY Fitch assesses BFG's rating by notching down from its internal assessment of the creditworthiness of Shanghai SASAC, reflecting the close linkage between the two entities. BFG is Shanghai's largest vertically integrated trader and supplier of agricultural and food products and services, and is fully owned by Shanghai SASAC. BFG has a similar role of providing food security as COFCO (Hong Kong) Limited's (A-/Stable) parent, COFCO Corporation, which has a more national scope. BFG's strategic importance to its government stakeholder is relatively lower compared with COFCO's due to BFG's lack of a diplomatic role, limited government intervention in its M&A and its limited supporting role for other SOEs. KEY ASSUMPTIONS Fitch's key assumptions within our rating case for the issuer include: - Revenue growth at 11% and 6% in 2017 and 2018 - EBITDA margin to remain around 7% in 2017 and 2018 - Capital expenditure to remain at around CNY7 billion per annum RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action -an upgrade of Fitch's internal assessment of the creditworthiness of the Shanghai Municipality Future Developments That May, Individually or Collectively, Lead to Negative Rating Action -a lowering of Fitch's internal assessment of the creditworthiness of the Shanghai Municipality or evidence of a weakening of BFG's legal, operational, and strategic linkages with the Shanghai Municipality. LIQUIDITY Ample Liquidity: BFG had total cash and equivalents of CNY33 billion and unutilised bank facilities of CNY210 billion at end-Dec 2016, which are more than sufficient to repay and refinance its outstanding short-term debt of CNY44 billion. FULL LIST OF RATING ACTIONS Bright Food (Group) Co., Ltd. Long-Term Foreign-Currency IDR affirmed at 'A-'; Outlook Stable Senior unsecured rating affirmed at 'A-' Issued by Bright Food Singapore Holdings Pte. Ltd. and guaranteed by BFG EUR400m 1.625% senior notes due 2019 affirmed at 'A-' Issued by Bright Food Singapore Holdings Pte. Ltd. and guaranteed by BFG EUR800m 1.125% senior notes due 2020 affirmed at 'A-' Issued by Bright Food Hong Kong Limited and guaranteed by BFG USD500m 3% senior notes due 2018 affirmed at 'A-' Contact: Primary Analyst Yee Man Chin Director +852 2263 9696 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Li Chen Analyst +86 21 5097 3009 Committee Chairperson Kalai Pillay Senior Director +65 6796 7221 Summary of Financial Statement Adjustments - Business taxes and surcharges have been deducted from revenue Outstanding bonds are adjusted to face value Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria Corporate Rating Criteria (pub. 07 Aug 2017) here Parent and Subsidiary Rating Linkage (pub. 31 Aug 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below