GCL New Energy Holdings Ltd. Downgraded To 'B+' On Heightened Business Risk; Notes Lowered To 'B'; Outlook Negative
We expect GNE's capability to generate cash flows will be strained over the next 12 months due to delays in renewable subsidy payments and rising interest expenses. We have revised GNE's group status to moderately strategic from strategically important, in consideration of GNE's divestment strategy which will dilute its contribution to the parent group GCL-Poly. We expect the parent group to provide limited support to GNE given its own financial strength has also significantly weakened due to overcapacity in China's solar material sector. On Feb. 19, 2019, S&P Global Ratings lowered its long-term issuer credit rating on GNE to 'B+' from 'BB-'. At the same time, we lowered the issue rating on the company's senior unsecured notes to 'B' from 'B+'. We removed the ratings from CreditWatch, where they were placed with negative implications on Aug. 23, 2018. The negative outlook on GNE reflects our view that the company