S&P: Vinacomin rating unaffected by sovereign rating action
S&P: Vinacomin rating unaffected by sovereign rating action
Standard & Poor's Ratings Services said today that its rating and outlook on Vietnam National Coal and Mineral Industries Holding Corp. Ltd. (Vinacomin; BB-/Negative/--) are not affected by the sovereign rating action on Vietnam (BB-/Stable/B; axBB+/axB). Standard & Poor's recently revised the sovereign rating outlook to stable from negative.
We are not revising the outlook on Vinacomin because the rating and outlook on the company primarily reflect its stand-alone credit profile of 'bb-'. We believe there is a "low" likelihood of extraordinary government support in the event of financial distress, as defined in our criteria for rating government-related entities. Our view is based on the "limited" importance Vinacomin's creditworthiness represents to the government.
We continue to believe there is a one in three chance the rating on Vinacomin could be lowered in the next 12 months if the company's operating cash flows weaken because of increasing domestic sales at government-regulated prices. Vinacomin will have to rely more on debt to fund its significant capital expenditure program if cash flows weaken. This could lead the company's credit protection measures or liquidity to deteriorate. A debt-to-EBITDA ratio of more than 4x on a sustained basis would indicate such deterioration.
Standard & Poor's
