According to the credit rating agency, it withdraws the ratings as Vingroup has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings or analytical coverage for Vingroup.
Last October, Fitch affirmed Vingroup’s long-term foreign- and local-currency Issuer Default Ratings at ‘B+’. The outlook was revised to negative from stable.
The negative outlook then reflected Vingroup’s heightened business risk and Fitch estimated that leverage, defined as net debt/adjusted inventory, was likely to rise to 58 per cent in 2018, before falling to 36 per cent in 2019 (2017: 45 per cent), due to the $3.1 billion capital expenditure for its expansion into auto manufacturing, of which $1.4 billion is debt funded.
Vingroup financed its equity contribution in VinFast, its auto-manufacturing venture, by selling down its interest in its highly cash-generative property business, following an earlier divestment of its investment-property arm. Vingroup has no expertise and limited experience in the auto-manufacturing segment, increasing execution risk. However Vingroup has hired relevant people from the industry to run the business, mitigating the risk.
Continued losses in its retail and hospitality segments also increase the group’s business-risk profile, leading Fitch to tighten Vingroup’s negative leverage guidance to 45 per cent, from 60 per cent.