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Moody's Corporation : Moody's reviews China Zhengtong's Ba3 rating for downgrade

07/26/2013 | 06:37am US/Eastern
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Global Credit Research - 26 Jul 2013

Hong Kong, July 26, 2013 -- Moody's Investors Service has placed the Ba3 corporate family rating of China ZhengTong Auto Services Holdings Limited (ZhengTong) on review for downgrade.

RATINGS RATIONALE

"The rating review is mainly driven by our concerns over the company's weak liquidity and its increasing refinance risk, as well as its heavy reliance on short-term debt financing and the absence of clear take-out plans," says Chenyi Lu, a Moody's Vice President and Senior Analyst.

"ZhengTong has loans of approximately RMB1.0 billion maturing on 16 November 2013 and RMB1.2 billion on 11 March 2014. At this stage, the company does not have adequate cash to pay off its maturing debt. The company is currently pursuing various refinancing options, but hasn't managed to conclude the refinancing up to date," adds Lu, who is also Lead Analyst for the company.

Moody's views ZhengTong's heavy reliance on short-term financing and the close proximity of its debt maturities as materially credit negative for its credit profile. If the company again uses short-term loans to refinance its upcoming maturities or if Moody's does not view the terms of any refinancing as satisfactory, then its ratings will be under immediate pressure for downgrade.

Moody's review will focus on ZhengTong's: (1) ability and plans to refinance its short-term debt expeditiously and on satisfactory terms, and (2) business operations in light of slower growth in the luxury car market in China and resultant the impact on its credit profile.

The principal methodology used in this rating was the Global Automotive Retailer Industry Methodology published on December 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Incorporated in 1999 and headquartered in Beijing, ZhengTong is a leading car dealership in China, with a focus on the luxury and ultra-luxury car market. The company has operations in 13 provinces, covering 29 cities in the top tier coastal cities, as well as in the fast-growing second- and third-tier cities in central and north China. It listed on the Hong Kong Stock Exchange in December 2010.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

Lu, Chenyi
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

No Related Data.

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.


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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy."


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

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