VNET Shares Pop As Fitch Sees Robust Data Center Demand From Alibaba

Fitch Ratings has affirmed China-based carrier-neutral data center operator VNET Group Inc's VNET Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B+.'
The Outlook is Negative, reflecting Fitch's expectation that VNET's 2021-2022 funds flow from operations (FFO) leverage will worsen to above 6.0x (2020: 4.2x), the threshold above which we lead to negative rating action.
The proposed US dollar bond issuance with a part of the proceeds to fund capex accounts for the deteriorating FFO leverage.
The new bond issuance will stretch the company's balance sheet and slow the pace of deleveraging.
However, Fitch expects EBITDA growth will drive deleveraging in the medium term.
VNET will benefit from robust demand for data centers from Chinese internet companies and public cloud-service providers like Alibaba Group Holding Ltd BABA (A+/Stable).
Price Action: VNET shares traded higher by 5.17% at $17.09 on the last check Friday.