March 2, 2018 / 9:47 AM / a year ago

UPDATE 1-China's CEFC Shanghai Int'l downgraded after bond trade suspended

* China Lianhe downgrades CEFC Shanghai International long-term issuer rating to AA+ from AAA

* Company placed on credit rating watchlist

* China Lianhe says no “valid and definite response” from CEFC Shanghai on reports regarding CEFC China Energy chairman

* Trade in CEFC Shanghai International bonds suspended since Thursday (Recasts with ratings downgrades, adds details throughout)

By Andrew Galbraith

SHANGHAI, March 2 (Reuters) - A major Chinese credit ratings agency downgraded CEFC Shanghai International Group on Friday, a day after the company suspended trading in its bonds following media reports of an investigation into the chairman of its parent company.

China Lianhe Credit Rating Co. said in a statement that it had downgraded CEFC Shanghai International’s long-term issuer rating one notch to AA+ from AAA, and would be placing the company on a watchlist.

It also downgraded two of CEFC Shanghai International’s medium-term notes from AAA to AA+, still investment grade.

The agency said it had sought to verify media reports of the investigation into CEFC China Energy Chairman Ye Jianming, but that it had not received a “valid and definite response.”

China Lianhe said it was downgrading CEFC Shanghai International Group’s long-term issuer rating “on the basis that this matter may significantly affect the future development” of the company, referring to the reported investigation of Ye.

CEFC Shanghai International Group said on Thursday that it would suspend trading of its bonds.

Trade in five bonds issued by CEFC Shanghai International Group with a total value of 14 billion yuan ($2.21 billion) was suspended from March 1, the company said in a statement posted on the Shanghai Stock Exchange’s website. It did not say when trade might resume.

The price of the company’s 3 billion yuan, 4.98 percent 2020 bond fell 33 percent on Thursday morning, prompting the Shanghai Stock Exchange to suspend trading for most of the day.

“To protect against unusual fluctuations in the price of outstanding bonds, and in accordance with relevant regulations of the Shanghai Stock Exchange, (trading of) these bonds will be suspended from Mar. 1,” the statement said.

“In a situation where the abovementioned serious matter significantly affects bondholders’ interests, the company may convene a bondholders meeting,” the statement added, referring to media reports regarding CEFC China Energy’s chairman.

Ye, chairman of a private firm that has agreed to buy a nearly $9.1 billion stake in Russian oil major Rosneft, has been investigated for suspected economic crimes, a person with direct knowledge of the matter told Reuters on Thursday.

CEFC China Energy said in a statement on its website late on Thursday that it was “operating normally”. ($1 = 6.3454 Chinese yuan renminbi) (Reporting by Andrew Galbraith Editing by Eric Meijer and Kim Coghill)

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