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TEXT-Fitch rates China State Construction International 'BBB-';outlook stable
January 29, 2013 / 8:33 AM / 5 years ago

TEXT-Fitch rates China State Construction International 'BBB-';outlook stable

(The following statement was released by the rating agency)

Jan 29 - Fitch Ratings has assigned China State Construction International Holdings Limited (CSCI) a Long-Term Issuer Default Rating (IDR) of ‘BBB-’ and a senior unsecured rating of ‘BBB-'. The Outlook is Stable.

In line with Fitch’s ‘Parent and Subsidiary Rating Linkage’ criteria, the rating reflects CSCI’s strong operational linkage with its parent companies and strong legal ties in the financing agreements within the group. CSCI is 57.1% (as of end-2012) owned by holding company China Overseas Holdings Limited (COHL), which in turn is fully owned by China State Construction Engineering Corporation Limited (CSCECL). CSCECL is 55.1% (as of end-2012) indirectly owned by State-Owned Assets Supervision & Administration Commission of the State Council (Central SASAC). COHL, which also owns 53.2% of China Overseas Land & Investment Limited (COLI), one of the largest homebuilders in China, is the key subsidiary of CSCECL.

CSCI is a Chinese engineering and construction (E&C) company with a long track record and leading positions in Hong Kong and Macau construction markets. CSCI also brings to CSCECL its proven expertise in infrastructure investments in China, and is positioned as a key platform for the parent companies’ expansion in infrastructure operation and investments. It is participating in China’s rapid social housing development, which aims to account for 20% of China’s residential property supply during the 12th “Five Year Plan” period (2011-2015).

The Stable Outlook reflects Fitch’s expectation that CSCI will maintain strong linkages to its parent companies. CSCI had a low leverage, as measured by Fitch defined funds from operations adjusted net leverage, of less than 1.5x as of end-2011. Fitch expects CSCI to maintain steady EBITDAR margins of over 10%, and, driven by rapid expansion, a leverage over 2.5x after 2012.

WHAT COULD TRIGGER A RATING ACTION?

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

- Strengthening of credit profile of CSCI’s parent group companies

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

- Weakening of credit profile of CSCI’s parent group companies

- Weakening linkages between CSCI and the parent companies

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