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TEXT-S&P Rates China Tianrui's Proposed Sr. Unsecd Notes 'B'
(The following was released by the rating agency)
HONG KONG (Standard & Poor's) Oct. 8, 2012--Standard & Poor's Ratings Services today assigned its 'B' issue rating to a proposed issue of U.S. dollar-denominated senior unsecured notes by China Tianrui Group Cement Co. Ltd. (B+/Stable/--; cnBB/--). At the same time, we assigned our 'cnBB-' Greater China regional scale rating to the proposed notes. The rating on the notes is subject to our review of the final documentation for the notes issuance.
The proposed issue is rated one notch lower than the corporate credit rating on Tianrui because of priority liabilities at its operating company in China. Tianrui will use the proceeds from the proposed notes to refinance debt and for general corporate purpose.
The proposed issuance does not affect the rating on Tianrui. The company's financial performance in the first half of 2012 was in line with our expectation, with an operating margin of about 20%. We expect the operating margin to stay above 20% in the next 12 months as large national infrastructure projects, such as the South-North Water Transfer Project, fuel demand.
The rating on Tianrui reflects the company's untested corporate governance, short track record, heavy reliance upon short-term debt to support its capital structure, and aggressive growth plans. We also note that Tianrui operates in a competitive, cyclical, and capital-intensive industry, which we believe is in a weak cycle. The company's operating scale, reasonable geographic diversification, and relatively efficient operations due to vertical integration temper the weaknesses. (For details, see our summary analysis published Oct. 8, 2012, on RatingsDirect on the Global Credit Portal.)
RELATED CRITERIA AND RESEARCH
-- Summary Analysis: China Tianrui Group Cement Co. Ltd., Oct. 8, 2012
-- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Key Credit Factors: Business And Financial Risks In the Global Building Products And Materials Industry, Nov. 10, 2008
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
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