Chinese conglomerate Fosun International Limited has stated that it officially notified Moody’s, an American business and financial services company, on October 12 of its decision to terminate business engagement with the rating service, ceasing to provide relevant information on the firm effective from that day.
On August 23, Moody’s Investors Service downgraded to B1 from Ba3 the corporate family rating of Fosun with a negative rating outlook. The downgrade reflects Fosun’s weak liquidity profile, elevated refinancing pressure due to the challenging onshore and offshore funding environments.
According to a report issued by Moody’s, Fosun’s rating is Ba2 due to many quantitative indicators such as investment strategy, asset concentration, geographical diversification, business diversification, portfolio transparency, financial strategy, financial leverage ratio and liquidity indicators. However, because Moody’s analysts were subjectively pessimistic about the economic environment, rather than worrying about Fosun’s own financial situation, Moody’s finally adjusted its rating to B1.
In response to Moody’s rating adjustment, Fosun said that its business operations are stable, which is attributable to its diversified asset portfolio, abundant capital, stable relationships with financial institutions, and its diversified financing channels. The adjusted rating would not affect Fosun’s debt repayment ability.
Fosun, founded in 1992, is a household consumer industry group involved in manufacturing, finance, cultural tourism, real estate and other fields, with 47 companies under its control. In 2007, it was listed on the main board of the Hong Kong Stock Exchange. In the first half of the year, its revenue was about 82.892 billion yuan ($11.43 billion), up 17.7% year-on-year, of which overseas business revenue was about 38.76 billion yuan, accounting for 46.76%.
In September, the rumor that “Fosun suffered 650 billion yuan debt” was widely spread in China, which aggravated market volatility and panic. However, according to its semi-annual report for 2022, as of June 30, its interest-bearing loans were about 260 billion yuan. The rumored number actually included all the debts of its subsidiaries like insurance companies and banks.
Fosun has frequently sold its shares in listed companies recently. On September 6, it transferred 28 million shares of Fosun Tourism Culture to a third party at a price of HK $8.57 per share, cashing in HK $240 million. On October 19, it said that it planned to sell 60% equity of Nanjing Iron and Steel United Co., Ltd. for no more than 16 billion yuan.
Guo Guangchang, Chairman of Fosun International, mentioned pressure on the company at the emergency investor communication meeting held on September 15. He said that in the current market environment, Fosun is under tremendous pressure, which comes from the influence of public opinion on the one hand and the closure of the public debt window on the other hand. The company’s long-term strategy is to increase cash reserves and thicken the “safety cushion.”