Sirius Int’l Is Insulated from Liquidity Issues at Chinese Parent Firm CMIG: S&P

Reported liquidity issues at China Minsheng Investment Group (CMIG), the ultimate owner of Sirius International Group, will not affect Sirius Group’s creditworthiness, said a bulletin issued by S&P Global Ratings.

S&P said its rating for Sirius Group continues to be based on its assessment of the group on a stand-alone basis rather than the assessment of CMIG’s financial position.

Shanghai-based CMIG, a private investment group, is facing a liquidity crisis related to its massive debt burden, which was approximately $34 billion in June 2018. Problems with the company’s liquidity were highlighted on Feb. 1 when it missed payments owed to bondholders, according to press reports.

Sirius has operated independently from CMIG since its acquisition in 2016, demonstrated by the absence of dividend payments to CMIG and an independent investment policy, S&P said.

The NASDAQ listing of Sirius Group in November 2018 further enhanced the group’s independence, S&P affirmed. CMIG’s ownership stake was reduced and a majority independent board was formed, said S&P, noting that its board now consists of six directors, five of whom are independent. One board member is a CMIG representative.

The shareholder agreement, made when the group was listed, enshrines the board’s independence and structure, explained S&P. “In our view, this protects the group from any upstreaming of capital to CMIG. Any extraordinary dividend payment would require approval from an independent board,” added the ratings agency.

Sirius Group falls under the supervision of several regulators including the Bermuda Monetary Authority, Sweden’s Financial Supervisory Authority, the UK’s Prudential Regulation Authority, and The New York State Department of Financial Services. Singapore-based CMIG International, the intermediate holding company above the Sirius Group, is regulated by the Monetary Authority of Singapore, said S&P.

S&P said this report does not constitute a rating action.

Source: S&P Global Ratings