International credit rating agency S&P Global Ratings (Standard & Poor's Ratings Services) has announced that it has kept its BBB+ corporate credit rating for Chinese steelmaker China Baowu Steel on credit-watch with negative implications because the proposed merger of the group with Chinese steelmaker Wuhan Iron & Steel (WISCO) is not completed and restructuring will be implemented in the first half of 2017 and S&P needs further details about the combined group's financial policy.
According to S&P’s statement, it anticipates that WISCO's weaker operating efficiency will undermine Baowu Steel's relatively strong competitive position and profitability. The combined group should benefit from enhanced scale, an established clientele, and product and geographic diversity. However, S&P also believes the group's overall competitive position may weaken as synergies take time to materialize. Still, the level of implementation and integration will likely depend on the Chinese government's final consolidation plan. S&P will assess the influence on the combined group in terms of financial position and business operations.