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Fitch Assigns Bright Food's Proposed EUR Notes 'A-(EXP)'
June 28, 2017 / 2:49 AM / 6 months ago

Fitch Assigns Bright Food's Proposed EUR Notes 'A-(EXP)'

(The following statement was released by the rating agency) HONG KONG/SHANGHAI, June 27 (Fitch) Fitch Ratings has assigned Bright Food Singapore Holdings Pte. Ltd.'s proposed euro-denominated notes an expected rating of 'A-(EXP)'. The notes are to be unconditionally and irrevocably guaranteed by China-based Bright Food (Group) Co., Ltd. (BFG, A-/Stable). The notes are rated at the same level as BFG's senior unsecured debt rating as they represent direct, unconditional, unsecured and unsubordinated obligations of the company. The final rating is contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS Shareholding Reshuffle, Unchanged Linkage: The Shanghai State-owned Assets Supervision and Administration Commission (SASAC) decreased its direct stake in BFG to 8.77% in 2016, from 54.16% in 2015, after transferring most of its stake to Shanghai Municipal Investment (Group) Corporation (Shanghai Chengtou) and Shanghai Guosheng Group Co., Ltd (Shanghai Guosheng), both 100%-owned by Shanghai SASAC. Shanghai Guosheng currently holds 47.56% of BFG and Shanghai Chengtou holds 43.67%. Shanghai Guosheng serves as Shanghai SASAC's investment holding platform and Shanghai SASAC retains administrative power over BFG's management and strategy. Fitch believes the shareholding reshuffle does not change the linkage between BFG and Shanghai SASAC. Pivotal Policy Role: BFG supplies 44.7% of Shanghai's vegetable and edible agriculture products. The group also manages 85% of Shanghai's policy grain reserves and all edible oil reserves. Fitch considers BFG an indispensable safeguard for the city's food quality and believes that as more food-safety regulations are enacted, BFG will solidify its policy role in the industry. Public Listings Add Liquidity: BFG successfully listed its property assets through a backdoor listing of Bright Real Estate Group Co., Ltd. in November 2015. BFG also plans to list Manassen Foods in the near term and is considering listing more subsidiaries to increase return on equity. BFG's liquidity position will benefit from the listings. Leverage Under Control: BFG has acquired several overseas companies since 2010, most recently completing an acquisition of 50% of New Zealand-based meat producer Silver Fern Farms Limited in December 2016. Management has indicated that BFG is committed to integrating the companies it has acquired and at the same time lowering its leverage in the mid-term. In April 2017, BFG announced its deal to sell its 60% stake in Weetabix Food Company to US-based cereal maker Post Holding Inc for GBP1.4 billion based on its enterprise value. BFG's FFO-adjusted net leverage was 5.7x at end-2016 and we expect leverage to remain relatively stable over the medium term if management follows through on its commitments. DERIVATION SUMMARY Fitch assesses BFG's rating by notching down from its internal assessment of the creditworthiness of Shanghai SASAC, reflecting the close linkage between the two entities. BFG is Shanghai's largest vertically integrated trader and supplier of agricultural and food products and services, and is fully owned by Shanghai SASAC. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for BFG include: - Revenue to reach CNY166 billion by 2018 (2016: CNY154 billion) - Revenue growth of below 10% in 2017-2018 (2016: 5%) - EBITDA margin improving to around 8% in 2017-2018 (2016: 7.3%) RATING SENSITIVITIES Future developments that may, individually or collectively, lead to positive rating action include: - an upgrade of Fitch's internal assessment of the creditworthiness of the Shanghai Municipality. Future developments that may, individually or collectively, lead to negative rating action include: - a lowering of Fitch's internal assessment of the creditworthiness of the Shanghai Municipality or evidence of a weakening of BFG's legal, operational and strategic linkages with the Shanghai Municipality. LIQUIDITY BFG had total cash and equivalents of CNY33 billion and unutilised bank facilities of CNY210 billion at end-2016, which are more than sufficient to repay and refinance its outstanding short-term debt of CNY44 billion. Contact: Primary Analyst Yee Man Chin Director +852 2263 9696 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Li Chen Analyst +86 21 5097 3009 Committee Chairperson Kalai Pillay Senior Director +65 6796 7221 Date of Relevant Rating Committee: 26 August 2016 Summary of Financial Statement Adjustments Business taxes and surcharges have been deducted from revenue Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage - Effective from 17 August 2015 to 27 September 2016 (pub. 17 Aug 2015) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. 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As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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