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Fitch Affirms Chongqing Nan'an Urban Construction & Development at 'BBB+'; Outlook Stable
June 22, 2017 / 7:44 AM / 2 months ago

Fitch Affirms Chongqing Nan'an Urban Construction & Development at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG/SHANGHAI, June 22 (Fitch) Fitch Ratings has affirmed Chongqing Nan'an Urban Construction & Development (Group) Co., Ltd.'s (CQNA) Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB+'. The Outlook is Stable. Fitch has also affirmed the 'BBB+' long-term foreign-currency ratings on the following notes issued by CQNA: - USD300 million 2.875% senior unsecured note due 2019 - USD500 million 3.625% senior unsecured note due 2021 - USD200 million 4.5% senior unsecured notes due 2026 KEY RATING DRIVERS Linked to Chongqing Municipality: CQNA's ratings are credit-linked to Fitch's internal assessment of the creditworthiness of Chongqing Municipality. The link reflects strong oversight and supervision by the government, mid-range integration with the municipal budget, together with mid-range strategic importance of CQMA's public-sector business to the municipality. These factors indicate the likelihood that CQNA would receive extraordinary support, if needed. CQNA is classified as a credit-linked public-sector entity under Fitch's criteria. Chongqing's Creditworthiness: Chongqing is one of four central-government-controlled municipalities in China and serves as one of the key growth drivers of China's western development. The municipality's gross regional product growth rate was China's fastest in 2016. The strengths are partially offset by its high level of contingent liabilities arising from the state-owned enterprises operating in the municipality, as well as its relatively weak transparency. Strategic Importance Attribute at Mid-range: CQNA is one of the most important urban developers in Chongqing. The company executes the government's urbanisation plan for the Chongqing Nan'an district. Its business focuses on urban infrastructure and primary land development. CQNA also acts as a funding centre for state-owned enterprises within the district. Government Integration Attribute at Mid-Range: Fitch believes support, if required, will ultimately come from the Chongqing municipal government due to the district government's strong fiscal and operational linkage with the Chongqing municipal government, which has provided capital injections and subsidies to monetarily support CQNA's business. Mid-range Legal Status: CQNA is registered as a local state-owned limited liability company under Chinese company law and is under the direct supervision of Chongqing Nan'an State-Owned Assets Supervision and Administration Commission. Tight Control and Supervision: The government closely monitors CQNA's financing plan and debt levels. The company regularly reports its budget performance and its board members, except for employee representatives, are appointed by the government. The Control attribute is assessed at Stronger. Weak Standalone Profile: CQNA's standalone credit profile is constrained by the public-service nature of its business of building affordable housing and developing infrastructure projects. The company has some businesses operated on a partly commercial basis, which help make up for losses incurred by its public-service projects. However, these businesses are still far from market-based. The weak standalone credit profile is mitigated by its strategic links with the government. RATING SENSITIVITIES A stronger or more explicit commitment of support from the municipal government may trigger positive rating action on CQNA. Significant changes to CQNA's strategic importance, dilution of the government's shareholding or reduced implicit government support could lead to a wider rating gap between CQNA and its sponsor. An upgrade of Fitch's credit view on Chongqing Municipality may trigger positive rating action on CQNA. Negative rating action on CQNA could derive from a deterioration of the credit profile of Chongqing Municipality, which could lower Fitch's internal assessment of the municipality's creditworthiness. A rating action on CQNA would also lead to similar action on the ratings on the 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 Guido Bach Senior Director +49 69 768 076 111 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. 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. 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 © 2017 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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