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Fitch Assigns Huarong Real Estate First-Time 'A' Rating
November 20, 2017 / 4:55 PM / a month ago

Fitch Assigns Huarong Real Estate First-Time 'A' Rating

(The following statement was released by the rating agency) TAIPEI, November 20 (Fitch) Fitch Ratings has assigned China-based Huarong Real Estate Co., Ltd. (Huarong Real Estate) a Long-Term Issuer Default Rating (IDR) of 'A' and a Short-Term IDR of 'F1'. The Outlook is Stable. Fitch has also assigned an 'A(EXP)' expected rating to the proposed senior unsecured notes to be issued by Huarong Universe Investment Holding Limited (Huarong Universe), a wholly owned subsidiary of Huarong Real Estate incorporated in British Virgin Islands. The proposed notes will be unconditionally and irrevocably guaranteed by Huarong Real Estate. The notes will be listed on the Irish Stock Exchange and the proceeds of the proposed notes will be used for general corporate purposes. The maturity structure will be finalized upon settlement. The final ratings on the proposed notes are contingent upon the receipt of final documents conforming to information already received. Huarong Real Estate is a direct and wholly owned subsidiary of China Huarong Asset Management Co., Ltd. (China Huarong, A/Stable), headquartered in Beijing. The company operates and serves as the exclusive platform for onshore property-related distressed asset development, and also plays a key role in overseeing China Huarong's offshore business operations, including acting as the group's offshore funding center. KEY RATING DRIVERS IDRS Huarong Real Estate's ratings are equalized with those of China Huarong, underpinned by Fitch's view of an extremely high probability of support from China Huarong, given its role as core subsidiary of the parent group and reputational risk to the parent in the case of default. Huarong Real Estate's ratings are equalized with those of the parent as Fitch considers Huarong Real Estate a core subsidiary of China Huarong. The ratings of China Huarong are linked to those of the Chinese sovereign (A+/Stable) and notched down once, reflecting the company's state ownership (63.36%) and strong control by the authorities. (See <a href="https//www.fitchratings.com/site/pr/1025837">Fitch Affirms China Huarong at 'A'; Outlook Stable, published on 29 June 2017). Huarong Real Estate actively participates in the distressed asset-based property development, leveraging on the group's leading franchise in China's distressed asset market. The company is an integral part of the parent's distressed asset resolution and is able to source on a selective basis distressed property from the parent's large distressed asset pool. It also serves as the platform to facilitate the parent's overseas business which is currently primarily focused on supporting China's "One-Belt One-Road" strategy in offshore markets. Huarong Real Estate shares the parent group's brand name, and enjoys strong synergies with the parent group through leveraging China Huarong's customer base and network to expand its business. Support from the parent has been strong as evidenced by the parent's provision of guarantees on some of its bank credits as well as liquidity support in the forms of shareholder loans and interbank borrowings. Total parent funding support through guarantee provision, shareholder loans, and interbank borrowings accounted for 14% of the company's total debt funding as of end-2016. The Stable Outlook reflects our expectation that Huarong Real Estate's role as core subsidiary and the probability to receive extraordinary support from China Huarong will remain unchanged in the next 12-18 months. SENIOR NOTES The proposed senior unsecured notes to be issued by Huarong Universe will be unconditionally and irrevocably guaranteed by Huarong Real Estate and constitute general, unsecured and unsubordinated obligations of Huarong Real Estate. The notes will rank pari passu with Huarong Real Estate's all other present and future unsecured and obligations. Therefore, the 'A(EXP)' expected rating on the proposed notes is aligned with Huarong Real Estate's Long-Term IDR of 'A'. RATING SENSITIVITIES IDRS AND SENIOR NOTES Any change to China Huarong's ratings, which would most likely reflect shifts in the perceived propensity or ability of the state to support China Huarong in a timely manner, will affect ratings on Huarong Real Estate to the same magnitude. In addition, a rating downgrade could be triggered by a weakening in the linkage between China Huarong and Huarong Real Estate, which could result from material reduction of the subsidiary's role in supporting the group's core functions or a significant dilution of China Huarong's stake in the company. Any changes to Huarong Real Estate's ratings will have direct impact on rating of the notes guaranteed by Huarong Real Estate to the same magnitude. Contact: Primary Analyst Rowena Chang Associate Director +886 2 8175 7602 Fitch Australia Pty Ltd, Taiwan Branch Suite 1306, 13F, 205, Tun Hwa N. Rd., Taipei, Taiwan 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 Global Non-Bank Financial Institutions Rating Criteria (pub. 10 Mar 2017) 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. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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