S&P Global Ratings lowered its long-term issuer credit ratings on BAIC Motor Corp. Ltd. (01958) to 'BBB' from 'BBB+'. At the same time, the credit rating agency lowered its long-term issue rating on BAG's guaranteed senior unsecured notes to 'BBB' from 'BBB+'.
S&P removed all the ratings from CreditWatch, where they were placed with negative implications on 3 April 2020.
The negative outlook on the company reflects Beijing Automotive Group Co. Ltd.'s (BAG) thin rating buffer given uncertain prospects for auto demand over the next 12-18 months.
S&P said BAG's financial leverage will continue to worsen in 2020 following its deterioration in 2019. The company's ratio of funds from operations (FFO) to debt dropped to 14.8% in 2019, below S&P's expectation of close to 20%. This was mainly attributable to the debt-funded acquisition of a 5% stake in Daimler in July 2019. BAG also raised additional debt to increase its cash on hand amid uncertainties in the auto industry.
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