S&P puts Qinghai Provincial Investment on negative watch, cites refinancing risks

BEIJING (Reuters) - S&P Global Ratings on Thursday put Chinese aluminum producer Qinghai Provincial Investment Group Ltd (QPIG) on negative credit watch, citing heightened refinancing risks for the state-backed company.

The ratings agency said it was concerned about the company’s ability to repay two $300 million senior unsecured notes due in September and December this year. It said the company lacked a “concrete and credible” refinancing plan.

S&P would lower the company’s long-term issuer credit rating from the current ‘BB-’ if it failed to produce a refinancing plan, the ratings agency said in a statement.

The reduction would be “more than one notch” if the Qinghai provincial government was less likely to provide extra support to the company, the statement said.

China’s local governments are under pressure to tighten their fiscal policies as Beijing deepens a multi-year financial crackdown. Some state-owned firms have been hard hit by efforts to rein in risky lending and curb bad debts by closing off shadow financing channels such as trusts, among other measures.

The state-backed aluminum producer has had trouble tapping the offshore bond market, and access to the domestic bond market has become more difficult due to rising defaults this year, S&P said.

“We don’t expect QPIG’s highly leveraged financial position to improve this year despite favorable operating conditions for aluminum producers,” S&P said, estimating that the company’s ratio of debt to EBITDA would stay above 25 times over the next 12 months.

The company’s short-term debt due in the 12 months ending May 2019 totaled 19.56 billion yuan ($3.01 billion), the ratings agency said.

Reporting by Yawen Chen and Ryan Woo; Editing by Darren Schuettler