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Investing.com -- Moody’s Ratings has confirmed the A3 issuer rating and baa3 Baseline Credit Assessment (BCA) of China Railway Group (HK:0390) Limited (CRG) on April 24, 2025. The A3 senior unsecured rating of the bonds issued by China Railway Xunjie Co., Limited, and guaranteed by CRG, has also been affirmed. However, the rating outlook has been revised to negative from stable.
The revised outlook is due to the company’s high leverage and the difficulties it faces in reducing its debt, particularly in light of the expected decrease in EBITDA contribution due to a drop in new orders and ongoing investment needs. Yuting Liu, Moody’s Ratings Vice President and Senior Analyst, noted that the affirmation of the rating reflects CRG’s leading role in China’s railway construction and infrastructure development, its robust access to funding, and the expectation that the company’s strategic importance to the Chinese economy will remain significant.
CRG’s A3 issuer rating includes its BCA of baa3 and a three-notch uplift based on the high likelihood of extraordinary support from the Government of China (A1 negative), given the company’s very high level of dependence on the government. This assessment of support takes into account CRG’s control by China’s State-Owned Assets Supervision and Administration Commission (SASAC), the company’s strategic importance to China’s railway construction sector, and the high reputational risk for the Chinese government if CRG faces financial distress.
On the same day, Moody’s Ratings also affirmed the A3 issuer rating and baa3 Baseline Credit Assessment (BCA) of China Railway Construction Corp Ltd (CRCC). The A3 senior unsecured rating of the bonds issued by CRCC Huayuan Limited and guaranteed by CRCC was also affirmed. Similar to CRG, CRCC’s rating outlook was revised to negative from stable.
The negative outlook for CRCC also reflects the company’s high leverage and the challenges it faces in reducing its debt, given the expected lower EBITDA contribution amid a drop in new orders and ongoing investment needs. Liu stated that the rating affirmation reflects CRCC’s leading role in China’s railway and infrastructure construction sector, its strong access to funding, and the expectation that the company’s strategic importance to the Chinese economy will remain significant.
CRCC’s A3 rating incorporates its BCA of baa3 and a three-notch uplift to reflect the high likelihood of extraordinary support from the Government of China (A1 negative), given the company’s very high level of dependence on the government. This support assessment reflects CRCC’s majority ownership and control by China’s State-Owned Assets Supervision and Administration Commission (SASAC), the company’s strategic importance to China’s railway construction sector, and the high reputational risk for the Chinese government if CRCC faces financial distress.
An upgrade of both CRG and CRCC’s ratings is unlikely, given the negative outlook. However, a downgrade could occur if the companies’ financial performance remains weak for their BCAs, or if their importance to the government weakens.
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