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Finance · Commodity
Fitch Ratings adds Tianjin commodities trader Tewoo to negative watch
2019/04/12 10:29:00
fitch ratings; tewoo group; commodities

Apr 12, 2019 (China Knowledge) - Global credit-rating company Fitch Ratings has placed Tianjin-based commodities trader Tewoo Group's foreign debt into negative watch due to concerns over the company's liquidity.

More than that, the negative watch by Fitch Ratings also highlights the state of the city's state-owned enterprises (SOEs) which have been hit by a series of defaults, bankruptcies and corruption scandals.

Negative watch means that the rating of the company could potentially be downgraded in the near future. Tewoo’s current long-term foreign-currency issuer default rating stands at BBB, or two notches above junk rating.

Tewoo which is wholly owned by the Tianjin State-owned Assets Supervision and Administration Commission (SASAC) has its main business in trading commodities such as metals, fuels and minerals. The company had also in the past took advantage of its access to easy credit to provide financing for steel buyers and makers, earning commission in the process.

However, this business of providing financing to steel companies plunged Tewoo into trouble after one of its close business partners Bohai Steel Group met with a debt crisis and collapsed, entering bankruptcy reorganization.

Due to the Bohai Steel debt crisis, Tewoo had built up RMB 186 billion in total liabilities as of June last year, accounting for 76.2% of its total assets. According to Fitch, Tewoo will be removed from negative watch should be able to prove that its access to funding has not deteriorated but will be downgraded should the converse be true.

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