Fitch Ratings has published
The Outlook is Stable.
BSUC ratings are derived from Fitch's internal assessment of the consolidated credit profile of BSUC's immediate parent,
KEY RATING DRIVERS
Strong Parent-Subsidiary Linkage: BSUC is 55%-owned by BISC and is the main steel operating subsidiary of the parent. In 2019, BSUC accounted for 80% of total assets and more than 65% of the group's consolidated EBITDA. BISC has absolute management control over BSUC with significant management overlap between the two. BISC provides guarantees to a large part of BSUC's bank debt and has injected numerous operating assets into BSUC. We rate BSUC on a top-down basis from our internal assessment of BISC's credit profile under our criteria.
Funds Parent's Rare Earths Operations: BISC is the largest rare earth producer in the world and receives around 50% of the annual rare earth ore production quota issued by
Leverage to
However, Fitch expects BSUC's financial profile to be stable in the near term as the company does not have major capex plans in the next few years. BSUC's financial flexibility metrics are likely to remain intact, with FFO fixed-charge coverage maintained at just below 3x.
Adequate Liquidity, Reliable Funding Access: At
DERIVATION SUMMARY
BSUC is rated on a top-down basis from its parent BISC, as per Fitch's Parent and Subsidiary Linkage Rating Criteria. Fitch's internal assessment of BISC's credit profile is based on Fitch's Government-Related Entities Rating Criteria. BISC is 77%-owned by the
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Low single-digit revenue decline in 2020, then revenue to rise by 1% on average annually in 2021-2023
EBITDA margin of 9%-10% during 2020-2023
Annual capex of around
No major acquisitions or divestitures during 2020-2023
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade of Fitch's internal assessment of the creditworthiness of
Increase in the likelihood of support from the Inner Mongolia government
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade of Fitch's internal assessment of the creditworthiness of Inner Mongolia.
Weakening of likelihood of support from the Inner Mongolia government.
Weakening linkages between BISC and BSUC.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: At
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
BISC is 77% owned by the
BSUC's ratings are notched down from BISC's ratings under Fitch's Parent Subsidiary Rating Linkage Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONS
ENTITY/DEBT RATING
Inner Mongolia Baotou Steel Union Co., Ltd. LTIDR BB + Publish
senior unsecured
LT BB+ Publish
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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