S&P cuts Fosun outlook to 'negative' on post-M&A debt concern

By Umesh Desai HONG KONG (Reuters) - S&P Global Ratings (S&P) has lowered the outlook for its rating of Fosun International Ltd <0656.HK> credit to "negative" from "stable", citing concern about the Chinese conglomerate's debt remaining high after recent acquisitions. S&P said it based the revision on Fosun's 2015 earnings announced on March 30. It also affirmed its rating of Fosun's long-term credit at "BB", two notches below investment grade. The revision came as a surprise to credit analysts who said credit-rating firms usually act within a short time of any material corporate development, and that there had not been any such development in the two months since the earnings release. The reason for the timing was unclear. The S&P analysts did not immediately respond to Reuters requests for comment. Just two weeks ago, China's largest private conglomerate said it aimed to become a world leader in insurance, healthcare and tourism, and that it had a "clear plan" to reduce debt. But on Monday, S&P said it was uncertain whether Fosun could cut debt in the near term. It also highlighted a rise in Fosun's ratio of debt to earnings before interest, tax, depreciation and amortisation (EBITDA) - to 16.8 in 2015 from 9.1 a year prior. S&P said Fosun's credit profile was weakened by the amount of debt taken on to fund acquisitions. S&P also said it could lower its rating of Fosun credit if it saw no clear plan to strengthen finances or improvement in its industrial arm. A Fosun spokeswoman told Reuters the firm had taken note of the change. "Fosun will continue to adhere to an 'insurance + investment' strategy and focus on healthy and long-term development of its businesses. We will keep working hard to improve the company's rating," she said in emailed comments. Credit analysts said they do not expect marked improvement in Fosun's financial position in the near term, and that the yield - or interest - on Fosun's bonds was not high enough to compensate for the risk of buying them. Fosun's bonds due 2020 were little changed on Tuesday, yielding around 4.3 percent. That was 50 basis points lower than the BB Rating dollar credit curve <0#BBUSDBMK=>, Thomson Reuters data showed. "We don't see value in the name at this point," said analyst Nuj Chiaranussati at Gimme Credit, who has an "underperform" view of Fosun's 2020 bond. "It is difficult to get earnings visibility because of the complex nature of its businesses and credit fundamentals are unlikely to improve in the near term," Chiaranussati said. (Reporting by Umesh Desai; Editing by Biju Dwarakanath and Christopher Cushing)