Fosun International Limited (Fosun) was downgraded to B1 from Ba3 with a negative outlook by Moody’s. The rating action was driven by Fosun’s refinancing uncertainties and execution risks related to assets sales, given increased market volatility and regulatory approval process, to pay back Fosun’s sizable debt maturing over the next year. Moody’s added, “Fosun’s liquidity is weak at the holding company (holdco) level. Its cash on hand at the holdco level is inadequate to cover its sizable short-term debt maturing over the next 12 months.” Given the difficulty in refinancing from the bond markets, Moody’s expects Fosun to increase its asset divestitures to meet debt payments. Moody’s expects asset divestures to diminish Fosun’s holdco investment portfolio size and quality, which explains why this no longer supports its previous Ba3 ratings. In the short term, a rating upgrade is improbable. Moody’s added that the outlook could return to stable if Fosun (i) improves its liquidity position (ii) executes asset divestments and other fundraising successfully to meet refinancing needs, (iii) maintains a stable business and financial profile at the holdco level, (iv) contains the contagion risk from its key investees. Fosun is rated BB by S&P, unchanged since 2014.
Fosun’s dollar bonds were trading weaker – its 5.95% 2023s were down 1.4 points to 88 cents on the dollar.