OREANDA-NEWS. Fitch Ratings has placed China-based Bright Food (Group) Co., Ltd.'s (Bright Food) Long-Term Issuer Default Rating (IDR) and senior unsecured rating of 'BBB-' on Rating Watch Evolving (RWE). At the same time, the 'BBB-' ratings on Bright Food's indirect wholly owned subsidiary Bright Food Hong Kong Limited (Bright Food HK) and the senior notes issued by Bright Food HK have also been placed on RWE.

KEY RATING DRIVERS

The RWE reflects uncertainty over the outcome of Fitch's reassessment of the linkage between Shanghai's State-owned Assets Supervision and Administration Commission (SASAC) and Bright Food. Fitch believes that this reassessment will result in a change in Bright Food's ratings.

State-owned Bright Food is mainly involved in food-related businesses, though it has interests in property and logistics. It has made several large investments in recent years, including acquiring Synlait Milk in 2010, Manassen Food in 2011, Weetabix in 2012, Salov Group in 2014 and Tnuva in 2015. It is in the midst of purchasing Miquel Alimentacio. It also said in May 2015 that it would merge operations with another state-owned food company, Shanghai Liang You Group.

If our reassessment concludes there is a stronger linkage between the two entities than previously thought, Fitch is likely to adopt a top-down approach to the ratings instead of the current bottom-up approach under Fitch's Parent Subsidiary Linkage criteria. The different approach is likely to lead to a rating upgrade.

If our view of the linkage between the two entities remains unchanged, Bright Food's weakened financial profile, which stems from recent acquisitions, will result in a downgrade.

In resolving the RWE on Bright Food, we will assess how the company's acquisitions and restructuring, including the merger with Shanghai Liang You Group, has changed the linkage between Bright Food and Shanghai SASAC since our last review in May 2014.

RATING SENSITIVITIES

The RWE will be resolved upon completion of our review of Bright Food's credit. If we conclude that the linkage between Bright Food and Shanghai SASAC is not enhanced, we will downgrade the ratings due to the high leverage arising from the recent acquisitions. An upgrade is likely if Fitch views the linkage between Bright Food and Shanghai SASAC has strengthened.