[ET Net News Agency, 24 April 2020] Moody's Investors Service has placed on review for
downgrade Fosun International Limited's (00656) Ba2 corporate family rating (CFR) and the
Ba2 senior unsecured rating on the bonds issued by Fortune Star (BVI) Limited and
guaranteed by Fosun.
The outlooks were changed to ratings under review from stable.
The review for downgrade of Fosun's ratings reflects Moody's concerns over the company's
ability to maintain its credit metrics at levels appropriate for its Ba2 CFR amid the
coronavirus-led economic downturn.
Moody's said the rapid and widening spread of the coronavirus outbreak, deteriorating
global economic outlook, falling oil prices, and asset price declines are creating a
severe and extensive credit shock across many sectors, regions and markets. The combined
credit effects of these developments are unprecedented. The tourism and consumer-related
businesses which accounted for 15% of Fosun's total investment portfolio value at the end
of 2019 -- have been significantly affected by the shock given their sensitivity to travel
restrictions, consumer demand and sentiment.
It believes Fosun is vulnerable to the risks of declines in its portfolio value and
dividend income over the next 12-18 months, given its debt-funded investment strategy,
reliance on short-term financing, and insufficient coverage of operating and interest
expenses by recurring income -- predominantly dividend income from investees -- at the
holding company level.
The agency added that Fosun is also exposed to the risk of credit contagion of its
investees in these unprecedented financial market volatility and challenging operating
environments. (KL)