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Fitch Affirms Anhui Transportation at 'BBB+'; Outlook Stable
May 24, 2017 / 9:18 AM / 7 months ago

Fitch Affirms Anhui Transportation at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG, May 24 (Fitch) Fitch Ratings has affirmed Anhui Transportation Holding Group Company Limited's (AHTG) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BBB+' with a Stable Outlook. The agency has also affirmed at 'BBB+' the ratings on the USD300 million 2.875% senior unsecured notes due 2018, issued by Anhui Transportation Holding Group (H.K.) Limited, which is fully owned by AHTG. The bond is rated at the same level as AHTG's Long-Term IDR, as the keepwell deed, deed of equity interest purchase undertaking and a cross-border US dollar standby facility transfer ultimate responsibility of payment to AHTG. KEY RATING DRIVERS Credit Linked to Anhui Province: AHTG's ratings are credit linked to, but not equalised with, those of China's Anhui province. The link reflects strong government oversight and supervision, mid-range level of integration with the provincial budget and strong strategic importance of AHTG's public sector business. These factors indicate that AHTG would receive extraordinary support from the government, if needed. AHTG is classified as a credit-linked public-sector entity under Fitch's criteria. Creditworthiness of Anhui Province: Anhui is landlocked in east-central China. The province achieved gross regional product (GRP) growth of 8.7% for the past two consecutive years. Its GRP ranked 13th among all 33 Chinese provinces and provincial municipalities in 2016, and its GRP per capita ranked 25th. Legal Status "Mid-Range": AHTG is registered as a state-owned limited-liability company under Chinese company law. It is wholly owned by the State-Owned Assets Supervision and Administration Commission of Anhui and supervised by the regional government. Strong Strategic Importance: AHTG is Anhui's sole public sector entity and is responsible for developing the province's expressway network and providing passenger transportation and logistics services. Anhui is a gateway province, being located at a crucial connection point in central China that links the north to the west and south to the east. AHTG operates around 90% of the province's toll roads, contributing to the region's land connectivity. Strong Control, Supervision: AHTG is controlled directly by the Anhui provincial government, which AHTG says closely monitors its financing plan and debt level. AHTG also says that it requires approval from Anhui Transportation Department to develop expressway networks and that its board of directors are appointed or nominated by the government, except for the employee representatives. Integration "Mid-Range": AHTG's expressway business is an important part of the regional government's infrastructure plan and is thus backed by significant government support. Its integration reflects government capital injections to support its toll-road developments. For 2015-2016, around 20% of AHTG's group capex was funded by capital injections from the government. Weak Standalone Profile: AHTG's business focuses on public services for transport, logistics and gas stations. Due to its heavily capex-driven business model related to toll road development, its net debt/EBITDA has remained at around 8x-10x for the previous three years and Fitch expected it to stay in this range in the medium term. RATING SENSITIVITIES Linkage with Municipality: Stronger or more explicit commitment of support from the Anhui government may trigger positive rating action on AHTG. Significant changes to AHTG's strategicimportance, diluted municipal shareholding or lower explicit and implicit governmental support could cause the rating gap between AHTG and Anhui to widen. Creditworthiness of Municipality: An upgrade of Fitch's internal credit view on Anhui may trigger positive rating action on AHTG. A weaker fiscal performance and/or heightened indebtedness of the provincial government could cause us to lower our internal assessment of AHTG's creditworthiness and this may trigger negative rating action on AHTG. Contact: Primary Analyst Lorraine Liu Analyst +852 2263 9929 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Terry Gao Senior Director +852 2263 9972 Committee Chairperson Guido Bach Senior Director +49 69 768076 111 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 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. 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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. 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