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Fitch Publishes Hengjian Holding's 'A+' Rating; Outlook Stable
June 23, 2017 / 2:18 AM / 3 months ago

Fitch Publishes Hengjian Holding's 'A+' Rating; Outlook Stable

(The following statement was released by the rating agency) HONG KONG/SHANGHAI, June 22 (Fitch) Fitch Ratings has published Guangdong Hengjian Investment Holding Co., Ltd. (GHIH) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of 'A+' with a Stable Outlook. Fitch has also assigned an expected 'A+(EXP)' rating to GHIH's proposed senior unsecured US dollar notes, to be issued by its indirect, wholly owned subsidiary, Hengjian International Investment Limited. GHIH will provide an unconditional and irrevocable guarantee to the proposed offshore notes. The proceeds will be used for general corporate purposes. The note is expected to be a bullet bond. The final ratings on the proposed US dollar notes are contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS Links to Guangdong Province: The ratings of GHIH are credit linked to those of Guangdong province. This reflects its 100% state ownership, strong provincial financial oversight and its strategic importance to the province. These factors result in a high likelihood of extraordinary support, if needed. Therefore, GHIH is classified as a credit-linked public sector entity under Fitch's rating criteria. Guangdong's Strong Creditworthiness: Located in the southern China, Guangdong province's gross regional product ranks first among all Chinese provinces. The province has a robust budgetary performance, a strong and well-diversified socio-economic profile and a large portfolio of high-quality state-owned assets. These strengths are mitigated by its moderately high contingent liabilities arising from provincial government-owned public sector entities. Legal Status "Mid-Range": GHIH is registered as a local state-owned limited liability company under Chinese company law. It is wholly owned by Guangdong State-Owned Assets Supervision and Administration Commission (Guangdong SASAC) and is supervised by the Guangdong provincial government. The government does not plan to dilute its shareholding in GHIH. Strategic Importance "Stronger": GHIH is designated as the province's sole state-owned asset operation and state-owned capital investment company. It manages a portfolio of key infrastructure assets, including power generation, grid operations and the region's intercity railway. In addition, it plays a vital role in supporting industry upgrades and fostering strategic emerging industries. Its unique status provides the company with a critical role in the management and reform of state-owned assets. Control "Stronger": GHIH's board members are mainly appointed by the Guangdong provincial government and major projects require government approval. The province closely monitors the company's financing plan and debt levels and it is required to regularly report its operational and financial results. Integration "Stronger": The government has provided ongoing capital injections and subsidies to monetarily support GHIH's business. The fiscal support aims to partly fund its capital expenditure and debt servicing. GHIH also receives non-monetary government support, which helps it maintain a robust long-term relationship with major banks, including policy banks and China's major state banks. Balancing Policy and Commercial Objectives: One of the company's core objectives is to incubate investments in strategically important emerging industries and develop and connect industry clusters. GHIH exits these investments when they mature and recycles the capital into new projects to support regional economic development. RATING SENSITIVITIES Linked with Guangdong Province: Positive rating action would stem from a similar change in the province's ratings, in conjunction with continued strong government support. Negative rating action could derive from negative action taken on Fitch's internal assessment of Guangdong province. The notching between GHIH and its sponsor may be widened if the company's policy role and strategic importance to the government weaken, if the government dilutes its control or shareholding or if the likelihood of support from the sponsor is diminished. Rating action on GHIH would lead to a similar action on the proposed US dollar notes. Contact: Primary Analyst Terry Gao Senior Director +852 2263 9972 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Ark Huang Analyst +86 21 5097 3153 Committee Chairperson Christophe Parisot Managing Director +33 1 4429 9134 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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