Shandong Hi-Speed Holdings Group earns Fitch upgrade to ’A-’; Stable outlook

Investing.com -- Fitch Ratings has upgraded the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of Shandong Hi-Speed Holdings Group Limited (SHHG) to ’A-’ from ’BBB+’. The outlook for the company remains stable.

This upgrade follows a similar action for SHHG’s parent company, Shandong Hi-Speed Group Co., Ltd. ( SHS (HN:SHS)), which was upgraded to ’A’/Stable. This reflects the increased support from the Shandong provincial government. The relationship between SHHG and SHS remains unchanged, with SHHG’s rating one notch below SHS. This is due to the parent’s ’Medium’ incentives to support the subsidiary, as assessed under Fitch’s Parent and Subsidiary Linkage Rating Criteria.

SHS directly holds a 22.68% stake in SHHG and has a 20.77% stake through its offshore subsidiary, Shandong International (Hong Kong) Limited. The majority of SHHG’s board and senior management are appointed by SHS, which also consolidates SHHG’s financials into its own.

Fitch believes that SHS’s Standalone Credit Profile is stronger than SHHG’s, due to its larger business scale, greater business diversification, wider access to financing resources, and a more spread-out debt structure. Government support is likely to flow to SHHG, as the parent company has provided credit enhancement to the subsidiary.

SHS guaranteed around 39% of SHHG’s total debt as of end-2024, including bank loans, bonds, and perpetual securities. These guarantees mainly cover the liabilities incurred by SHHG and its wholly owned subsidiary, Coastal Emerald Limited.

SHHG serves as a key offshore industrial investment and financing platform, investing in new energy and infrastructure sectors. In 2024, SHHG increased its stake in Shandong Hi-Speed New Energy Group Limited (SHNE) to 56.97% from 43.45%, bolstering its control in the new energy segment.

SHHG’s ratings are derived from Fitch’s assessment of SHS’s legal, strategic, and operational incentives to support SHHG. The ratings on SHS are derived from Fitch’s Government-Related Entities Rating Criteria, with China’s Shandong province as its sponsoring government.

SHHG has been listed on the Hong Kong stock exchange since 1992. It transformed into an offshore industrial investment and financing platform focused on the new-energy and new-infrastructure sectors after it acquired SHNE and VNET. SHHG’s total assets amounted to about CNY66.2 billion as of end-2024, of which 78.6% were industry investments.

Factors that could lead to a negative rating action or downgrade include a weakening of SHS’s legal, strategic, and operational incentives to support SHHG, dilution of the parent’s shareholding, or negative rating action on SHS. Conversely, stronger legal, strategic, and operational incentives for SHS to support SHHG could narrow the rating gap between SHHG and SHS, or positive rating action on SHS could lead to a positive rating action or upgrade.

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