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Fitch Affirms Cinda Asset Management at 'A'; Outlook Stable
April 20, 2017 / 9:47 AM / 8 months ago

Fitch Affirms Cinda Asset Management at 'A'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG, April 20 (Fitch) Fitch Ratings has affirmed China Cinda Asset Management Co., Ltd.'s (Cinda) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'A'. The Outlook is Stable. Fitch has also assigned final ratings of 'A' to the USD3 billion medium-term note programme by China Cinda Finance (2017) I Limited and the bonds issued under the programme. The final ratings are the same as the expected ratings assigned on 27 February 2017 and follow the receipt of final documents conforming to information already received. A full list of rating actions can be found at the end of this commentary. KEY RATING DRIVERS Rating Linked With Sovereign: Cinda's ratings are linked to those of the Chinese sovereign (A+/Stable) and rated one notch lower. This reflects Cinda's state ownership and strong control by the authorities. Strategic ties with the state mean a strong likelihood of extraordinary support, if needed. Therefore, Cinda is classified as a credit linked public-sector entity under Fitch's criteria. Legal Status Assessed at "Mid-Range": Cinda is a limited liability corporation. In December 2013, Cinda listed its "H" shares on the main board of the Hong Kong Stock Exchange. The legal status attribute is assessed at Mid-Range because, if necessary, the company may file for bankruptcy, and not all of its employees are civil servants. Strategic Importance Assessed at "Stronger": Cinda is one of the four asset management companies (AMCs) established by China's central government to mitigate financial risks, preserve state-owned assets, and promote the reform and development of China's financial system. Fitch expects strong sovereign support to be forthcoming to Cinda, if needed, because of its strategic and policy role in China's economy. Integration Assessed at "Mid-Range": Any default by the AMCs, including Cinda, would have considerable impact on the sovereign's reputation and in the political and economic spheres in China. Cinda receives substantial policy support from the central government and is closely monitored by the government. However, its debt does not benefit from guarantees from the sovereign. As a result the integration attribute is assessed at Mid-Range. Control and Supervision Assessed at "Stronger": The Ministry of Finance (MoF) holds 64.45% of Cinda while the National Social Security Fund (NSSF), which is directly administered by the central government, holds 7.6%. The MoF nominates a majority of Cinda's board members and controls the entity through the board. By law, Cinda's senior management is scrutinised and approved by the CBRC, which also has significant influence on the entity's business operations through industry and business activity supervision. Cinda's senior management reports its operational and financial conditions to the MoF and CBRC on a regular basis. Further Expansion: Cinda has continued to expand its distressed asset portfolio. Total assets increased 64.5% in 2016, mainly due to the acquisition of Hong Kong-based Nanyang Commercial Bank. The acquisition will open new channels for Cinda to manage and dispose of non-performing assets and supplement its integrated financial services. A capital replenishment in September 2016 has improved the company's capital adequacy ratio despite the increase in asset level. Fitch believes Cinda will continue to leverage its industry experience and seasoned management to maintain the expansion pace. Inherent and Concentration Risk: As a distressed asset manager, Cinda's portfolio carries more inherent credit risk than a normal loan portfolio. Concentration risk arises from Cinda's meaningful exposure to real estate in its portfolio. However, the low loan-to-value ratio of its distressed receivable portfolio and the significant value appreciation potential of its debt-equity swap (DES) asset portfolio partly neutralises the concentration risk. RATING SENSITIVITIES A positive or negative rating action could stem from a similar change in the sovereign's ratings. Additionally, stronger explicit support from the sovereign could result in an equalisation of the rating with the sovereign. Significant changes to its strategic importance or a dilution of state shareholding to below 51% could result in Cinda no longer being classified as a credit linked public-sector entity and, therefore, it may no longer be notched from the sovereign rating. The full list of rating actions is as follows: Cinda Long-Term Foreign-Currency IDR affirmed at 'A'; Outlook Stable Long-Term Local-Currency IDR affirmed at 'A'; Outlook Stable China Cinda Finance (2015) I Limited USD3 billion medium-term note programme affirmed at 'A' USD1.3 billion 3.125% senior unsecured notes due 2020 affirmed at 'A' USD1.7 billion 4.25% senior unsecured notes due 2025 affirmed at 'A' China Cinda Finance (2014) Limited USD1 billion 4.0% senior unsecured notes due 2019 affirmed at 'A' USD500 million 5.625% senior unsecured notes due 2024 affirmed at 'A' China Cinda Finance (2017) I Limited USD3 billion medium term note programme assigned final rating of 'A' USD700 million 4.4% senior unsecured notes due 2027 assigned final rating of 'A' USD700 million 4.1% senior unsecured notes due 2024 assigned final rating of 'A' USD1.3 billion 3.65% senior unsecured notes due 2022 assigned final rating of 'A' USD300 million 3.0% senior unsecured notes due 2020 assigned final rating of 'A' Contact: Primary Analyst Janet Liu Associate Director +852 2263 9983 Fitch (Hong Kong) Limited 19/F, Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Lorraine Liu Analyst +852 2263 9929 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 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. 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. 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