S&P: ALBA on developing watch

S&P said it placed the B- long-term corporate credit rating on ALBA Group plc & Co. KG on CreditWatch with developing implications.

The agency also said it placed on developing watch the CCC rating on ALBA Group’s €203 million unsecured notes. The recovery rating on these notes is unchanged at 6, indicating 0 to 10% expected default recovery.

The CreditWatch placement follows news that the company signed a joint venture agreement with an investment fund led by the Deng family, the majority shareholder of Chinese supplier of heavy industrial equipment company Techcent, S&P explained.

The joint venture, which is subject to anti-trust approvals, will take a more than 60% stake in selected areas of ALBA Group’s high-growth business in China and its services segment, which alone generated about one-quarter of ALBA Group’s revenues and about one-third of EBITDA in 2015, the agency said.

The potential joint venture stems from the search that ALBA Group started earlier this year for strategic investors for its business in China and its services segment, S&P said.

ALBA Group and Techcent aim for close collaboration to make the most of the attractive and high-growth businesses, the agency said.

The company’s business risk profile will be reassessed after discussing the implications of the pending transaction, given the significant reduction of scale and scope, S&P said, as well as the lost contribution from the high-margin services operations.

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