November 22, 2017 / 2:19 PM / a year ago

Fitch Affirms SFund at 'A-', Outlook Stable

(The following statement was released by the rating agency) HONG KONG, November 22 (Fitch) Fitch Ratings has affirmed Guangzhou Industrial Investment Fund Management Co., Ltd.'s (SFund) Long-Term Foreign- and Local-Currency Issuer Default Ratings of 'A-' with a Stable Outlook. Fitch has also affirmed the rating of its guaranteed USD230 million 3.85% five-year bonds due 2021 at 'A-'. These offshore bonds were issued by GUANGZHOU Silk Road Investment Limited, which is an indirect, wholly owned subsidiary of SFund. SFund provides an unconditional and irrevocable guarantee to the notes. KEY RATING DRIVERS Linked to Guangzhou Municipality: The ratings of SFund are credit-linked to, but not equalised with, those of China's Guangzhou Municipality. The link reflects strong government control and oversight, mid-range strategic importance to the municipality, integration with the government budget and legal status. These factors result in a high likelihood of extraordinary support, if needed, from the municipality. Therefore, SFund is classified as a credit-linked public-sector entity under Fitch's criteria. Guangzhou's Creditworthiness: Guangzhou Municipality is considered a first-tier city in China. Its gross regional product (GRP) ranks third among all Chinese cities, just behind Beijing and Shanghai. The municipality has a strong fiscal performance and modest debt level, supported by its vibrant socio-economic profile. Strategic Importance at Mid-Range: SFund is the investment manager for urban infrastructure development projects under Guangzhou's public-private partnership initiative. Under the government's mandate, it also invests in industries which are strategically important to Guangzhou. SFund is also leveraging on its experience in Guangzhou to partner with other prefecture-level governments to invest in their cities' infrastructure development projects. Stronger Control and Supervision: SFund is overall supervised by the Guangzhou State-owned Assets Supervision and Administration Commission. Its policy-driven investment projects need to be approved by the relevant government departments. Furthermore, it is subject to the regulations and supervision of the China Securities Regulatory Commission. SFund's chairman and supervision committee are appointed by the government. Government Integration at Mid-Range: SFund's daily operations are supported by management fees received from the government-directed portfolio. More than half of the existing investments were government directed. Also, Sfund receives financial support to carry out its mission. The Guangzhou Municipal Government injected equity capital of CNY6.8 billion, CNY6 billion and CNY4 billion for 2014, 2015 and 2016, respectively. Legal Status at Mid-Range: SFund is registered as a wholly state-owned limited liability company under China's company law. Therefore, Sfund's legal status does not indicate automatic absorption of its liabilities by Guangzhou Municipality. RATING SENSITIVITIES Credit-Linked to Municipality: A stronger or more explicit support commitment from Guangzhou Municipality may trigger a positive rating action on SFund. Significant weakening of SFund's strategic importance to the municipality, reduced government support, and/or a diluted government shareholding could result in a downgrade. Creditworthiness of Municipality: An upgrade of Fitch's internal credit view on Guangzhou Municipality may trigger a positive rating action on SFund. Negative rating action on SFund could derive from a deterioration in Fitch's internal assessment of the municipality's creditworthiness. Any rating action on SFund will result in a similar rating action on its guaranteed bonds. Contact: Jean Luo Associate Director +852 2263 9952 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Davis Sun Associate Director +86 21 5097 3052 Committee Chairperson Christophe Parisot Managing Director +33 1 44 29 91 34 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on 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 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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