Panda Green Liquidity And Refinancing Risk Remains High Despite Share Issuance; Ratings Remain On CreditWatch Negative

  • Panda Green Energy Group Ltd. (PGE) has recently raised funds through a share issuance and asset disposal of some solar projects.
  • However, the company's cash resources remain insufficient to meet its near-term debt obligations, in our view.
  • We are keeping the 'CCC+' issuer credit rating on the China-based solar utility company and the 'CCC' long-term issue rating on PGE's senior unsecured notes on CreditWatch with negative implications. The ratings were first placed on CreditWatch on Dec. 12, 2018.
  • Our CreditWatch placement reflects our view that PGE has yet to come up with a meaningful refinancing plan to handle its upcoming obligations.
HONG KONG (S&P Global Ratings) April 3, 2019--S&P Global Ratings said today 
that the rating on PGE and its senior unsecured notes remains on CreditWatch 
with negative implications. 

We maintain our view that the China-based solar utility company's cash 
resources are insufficient to meet its near term liquidity needs, mostly 
related to its debt repayment obligation in the near term. PGE has raised more 
than Chinese renminbi (RMB) 1 billion through asset disposals and by placing 
shares. This, combined with reported cash and pledged deposit amounting to 
RMB1.3 billion as of end 2018, is still insufficient to meet the company's 
short-term debt maturities, which we estimate at RMB4.7 billion (excluding the 
short-term loan from Qingdao City Construction, which was converted into PGE's 
shares in early 2019).

We estimate PGE's adjusted cash flow from operations to be negative in 2018 
and 2019, given prolonged renewable subsidy settlements in China. The company 
also has RMB2.5 billion equivalent in U.S.-dollar-denominated senior unsecured 
notes due in January 2020, as well as certain onshore private placement notes 
and corporate bonds potentially due in the second half of 2019, if investors 
decide to exercise the put options on these securities. 

Earlier this year, PGE received about RMB800 million of proceeds from its 
share subscription. In March 2019, the company disposed of 82.4 megawatt solar 
farm projects in the U.K. for about £34 million (about RMB296 million). The 
company also disposed of a 17% stake in one of its projects in China for RMB43 
million. Nevertheless, liquidity remains weak, given the company's significant 
near-term debt maturities. 

In resolving the CreditWatch, we will closely monitor PGE's asset disposal 
plans, its renewable subsidy collection process, the potential of receiving 
further support from shareholders, and PGE's ability to pre-finance some of 
its upcoming debt maturities well ahead of the maturity. We could lower the 
rating in the absence of any meaningful development and clarity on the 
refinancing plan in the near term.

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