April 9 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned CNPC General Capital Limited’s (CNPCGC), proposed guaranteed USD senior notes expected ratings of ‘A+(EXP)'. The notes will be irrevocably and unconditionally guaranteed by CNPC Finance (HK) Limited (CPFHK, A+/Stable).
The final ratings are contingent upon receipt of final documents conforming to information already received.
Key Rating Drivers
The ratings reflect the irrevocable and unconditional guarantee by CPFHK, a wholly owned subsidiary of China Petroleum Finance Limited (CPF). The latter is 51%-owned by China National Petroleum Corporation (CNPC; A+/Stable) and 49%-owned by PetroChina Limited (PetroChina) (A+/Stable), which is itself 86.51%-owned by CNPC.
CPFHK’s and CPF’s credit profiles are equalised with that of CNPC due to Fitch’s assessment of strong legal, operational and strategic ties between the entities as per the agency’s Parent Subsidiary Linkage methodology.
CNPC’s Foreign Currency Issuer Default Rating (IDR) of ‘A+'/Stable is constrained by its 100% owner, the Chinese government (A+/Stable). Although CNPC’s financial profile has weakened due to heavy capex and weaker cash generation from its mid-stream operations, refining and gas businesses specifically, its strong operating profile as one of the world’s largest integrated oil & gas companies makes it a ‘AA’ category credit on a standalone basis.
CPF and CPFHK together function as the sole treasury centre for the CNPC group, centralising settlements, debt financing and cash management. CNPC appoints all of CPF’s board members and senior management members. CPF appoints all of CPFHK’s board members; CPF together with CPFHK’s board members appoints all of CPFHK senior management members. CPF’s consolidated assets are also material in the context of CNPCs overall balance sheet. In addition, creditors of CPFHK benefit from keepwell agreements from CNPC and CPF. These keepwell agreements, while not guarantees, are considered to be beneficial to the note holders as they, together with Articles of Association of CPF and CPFHK, ensure that CPF and CPFHK have sufficient resources to meet their financial obligations.
Unlike the USD notes issued by CNPCGC in 2012, the proposed notes will not benefit from a guarantee from CNPC on the funds on-lent by CNPCGC to controlled subsidiaries of CNPC, and a charge over the share capital of CNPCGC. However, Fitch does not view the lack of these features as materially impairing the position of the holders of the proposed USD notes as they will benefit from the senior unsecured guarantee from CPFHK.
Any change to China’s sovereign Foreign-Currency IDR will lead to a corresponding change to the IDRs of CNPC and CPFHK.