HONG KONG (Standard & Poor's) Nov. 13, 2015--Standard & Poor's Ratings Services said today that it had lowered its long-term corporate credit rating on China Shanshui Cement Group Ltd. (Shanshui) to 'D' from 'CC'. At the same time, we lowered our long-term Greater China regional scale rating on the company to 'D' from 'cnCC'.
We also lowered our issue rating on Shanshui's U.S. dollar-denominated senior unsecured notes to 'D' from 'CC' and the Greater China regional scale rating on the notes to 'D' from 'cnCC'. Shanshui is a China-based cement producer.
"We lowered the rating because Shanshui failed to repay its Chinese renminbi 2 billion onshore super short-term commercial paper due Nov. 12, 2015," said Standard & Poor's credit analyst Jian Cheng. "In our view, the failure to repay this debt will trigger a cross-default of the company's other financial obligations, including some onshore bank loans and outstanding U.S. dollar notes."
Shanshui does not have enough financial capacity to fulfill its financial obligations due. We therefore assess that the company's general default is commensurate with a rating of 'D' instead of 'SD'.
Shanshui's winding-up petition and an application to the Grand Court of Cayman Islands to appoint provisional liquidators for restructuring also constitute an event of default under the terms of the company's outstanding U.S. dollar notes and resulted in an acceleration of payment of the notes.
"We believe that a shareholders' dispute over the board members at Shanshui has damaged the company's funding ability and operations," said Mr. Cheng.
Shanshui's largest shareholder, Tianrui (International) Holding Co. Ltd., continues to push for the replacement of the existing board at extraordinary general meetings.
Shanshui's liquidity has deteriorated significantly since the redemption of its U.S. dollar notes due 2016 in July 2015 and its onshore super short-term commercial paper in August 2015. Onshore banks are reluctant to provide further financing due to the uncertainty over management. In addition, weaker demand associated with lower cement prices is exerting pressure on the company's financial and liquidity positions.