S&P cuts Vingroup outlook to ‘negative’ on car venture debts

17-Sep-2019 Intellasia | VN Express | 6:02 AM Print This Post

Ratings firm Standard & Poor’s has revised its outlook on Vingroup from “stable” to “negative” due to increasing leverage to fund the auto business.

The US rating firm changed its rating of Vietnam’s largest private company to B+, saying in a statement Thursday that it expected the debt-equity ratio to stay elevated over the next 12-18 months.

Expanding into the automobile industry requires large upfront spending but would likely have losses in the initial ramp-up phase, it said.

Vingroup’s total adjusted debt could surpass VND130 trillion ($5.62 billion) by the end of this year and rise to VND155 trillion ($6.7 billion) by 2020, S&P noted.

The leverage ratio could therefore stay elevated at 4.5-5 for the next two years, compared with 5 last year and 3.2 in 2017, it added.

Vingroup said it anticipated the lowered outlook. “We are aware of the possibility that credit rating results may be affected in the initial period when investing heavily in industrial and technology sectors, especially cars,” Nguyen Viet Quang, deputy chair and CEO of Vingroup, said in a statement.

“However, these are just immediate challenges. In order to build a reputed Vietnamese brand in the international arena, we accept short-term difficulties.”

Vingroup has in place financial and risk management plans to gradually overcome these challenges, he said.

Last year another credit rating agency, Fitch, also lowered Vingroup’s outlook from stable to negative for its expansion into car manufacturing. In July Vingroup withdrew from Fitch’s rating programme.

Credit ratings count especially when businesses want to raise capital in the international market.



Category: Business, Vietnam

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