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Fitch Rates Sfund's Proposed Tap Issuance of USD Bonds 'A-(EXP)'
December 19, 2016 / 4:40 AM / a year ago

Fitch Rates Sfund's Proposed Tap Issuance of USD Bonds 'A-(EXP)'

(The following statement was released by the rating agency) HONG KONG, December 18 (Fitch) Fitch Ratings has assigned Guangzhou Industrial Investment Fund Management Co., Ltd.'s (SFund, A- /Stable) proposed tap of its US dollar senior unsecured bonds an expected rating of 'A-(EXP)'. The tap issuance will carry the same terms and conditions as the earlier issuance of USD200m of 3.85% bonds due 2021. The offshore bonds will be issued by GUANGZHOU Silk Road Investment Limited, which is an indirect, wholly owned subsidiary of SFund. SFund will provide an unconditional and irrevocable guarantee to the proposed bonds. The proceeds will be used for offshore working capital and general corporate purposes. The final ratings on the proposed bonds are contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS Linked to Guangzhou Municipality: The ratings of SFund are credit-linked to, but not equalised with, those of 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 generally 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 diversified socio-economic profile, and it is located strategically in the heart of the Pearl River Delta in southern China. Legal Status Attribute Assessed at Mid-Range: SFund is registered as a limited liability company under Chinese company law. It is wholly owned by the Guangzhou Municipal Government. Strategic Importance Attribute Assessed at Mid-Range: SFund is an important investment platform set up by the government to promote public-private partnerships and invest in the city's strategic and emerging industries. It also participates in the urban development of Guangzhou and some less-developed cities in Guangdong Province on behalf of the Guangzhou Municipal Government. Control and Supervision Attribute Assessed at Stronger: 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 regulations and supervision of the China Securities Regulatory Commission. SFund's chairman and supervision committee are appointed by the government. Government Integration Attribute Assessed at Mid-range: SFund has been receiving equity injections and capital contribution to assets under management from the Guangzhou Municipal Government since its inception in 2013. It received CNY950m in 2013, CNY6.82bn in 2014 and CNY6.46bn in 2015. The Guangzhou Municipal Government has also entrusted the fund CNY800m a year in the past three years to be invested in strategic local industries. In addition, the Guangzhou government has guaranteed the return of the supporting funds that were established with the Qingyuan and Meizhou governments and managed by SFund at 7.5% a year. Robust Standalone Profile: SFund's operating revenue and balance sheet have expanded rapidly since 2013 due to investments made upon receipt of capital injections from the government and other parties, such as insurance companies, into its funds. The company is currently primarily financed by equity and is looking to diversify its funding sources. RATING SENSITIVITIES Credit-Linked to the Municipality: A stronger or more explicit support commitment from Guangzhou Municipality may trigger a positive rating action on SFund. Significant weakening to 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 of in Fitch's internal assessment of the municipality's creditworthiness. A rating action on SFund would also lead to a similar action on the proposed US dollar bonds. Contact: Primary Analyst 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 Lin Pei Associate Director +852 2263 9912 Committee Chairperson Christophe Parisot Managing Director +33 1 44 29 91 34 Date of Relevant Rating Committee: 17 November 2016 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 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. 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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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