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Press Release: S&PGR Answers Questions On Yuhuang Chem. And Its U.S. Venture

23 Mar 2017 4:13 am
 
 
The following is a press release from Standard & Poor's: 
 
HONG KONG (S&P Global Ratings) March 23, 2017--S&P Global Ratings said today 
that Shandong Yuhuang Chemical Co. Ltd.'s China business looks steady, but the 
U.S. venture raises debt leverage and adds uncertainty to the business 
strategy. That's according to a Credit FAQ titled, "A Closer Look At Shandong 
Yuhuang Chemical Co. Ltd. And Its U.S. Methanol Venture." 
 
Yuhuang is a private enterprise petrochemical producer based in the eastern 
Chinese province of Shandong. S&P Global Ratings recently assigned its 'B+' 
long-term corporate credit rating to Yuhuang, reflecting our assessment of 
Yuhuang's small production scale, and limited geographic and product 
diversity. The outlook is stable based on the company's track record of steady 
margins and our expectation that average oil prices will trend slightly higher 
over the next year. 
 
Yuhuang recently issued its first U.S.-dollar denominated bond to help finance 
a methanol joint venture in the U.S. 
 
"The U.S. venture is one of the most important factors in our risk assessment 
of Yuhuang. The company's operating history is based in China, and in the 
refining and chemicals business. We do not know if management has the 
capability to run methanol business in the U.S., given the lack of experience 
in the country and this particular market segment," said S&P Global Ratings 
credit analyst Danny Huang. 
 
S&P Global Ratings also fielded questions about Yuhuang's competitive niche as 
a "teapot" refinery in an energy sector dominated by China's major state-owned 
oil companies. 
 
"We don't anticipate that competition against China's oil majors will worsen, 
given government plans to further liberalize the downstream market, or 
refining, marketing and chemical segments," said Mr. Huang. 
 
A high proportion of Yuhuang's debt is short-term in nature, leading to a less 
than adequate assessment of liquidity. Yuhuang plans to lengthen its debt 
maturity, but a reliance on short-term financing is locked into its business 
model, as the company borrows to purchase oil for refining. 
 
Only a rating committee may determine a rating action and this report does not 
constitute a rating action. 
 
The report is available to subscribers of RatingsDirect at 
www.globalcreditportal.com and at www.spcapitaliq.com.  If you are not a 
RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 
212-438-7280 or sending an e-mail to research_request@spglobal.com. Ratings 
information can also be found on the S&P Global Ratings' public website by 
using the Ratings search box located in the left column at 
www.standardandpoors.com.  Alternatively, call one of the following S&P Global 
Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office 
(44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; 
Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4009. 
 
Primary Credit Analyst: Danny Huang, Hong Kong (852) 2532-8078; 
                        danny.huang@spglobal.com 
Secondary Contact: Crystal Wong, Hong Kong (852) 2533-3504; 
                   crystal.wong@spglobal.com 
Media Contact: Cecilia S Ho, Hong Kong (852) 2532-8061; 
               cecilia.ho@spglobal.com 
 
 
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(END) Dow Jones Newswires

March 23, 2017 00:13 ET (04:13 GMT)
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