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Fitch Rates Huarong's Dual-Currency Notes 'A(EXP)'
April 18, 2017 / 6:54 AM / 8 months ago

Fitch Rates Huarong's Dual-Currency Notes 'A(EXP)'

(The following statement was released by the rating agency) HONG KONG, April 18 (Fitch) Fitch Ratings has assigned Huarong Finance 2017 Co., Ltd.'s proposed issue of US dollar and Singapore dollar dual-currency senior unsecured notes under its USD10 billion medium-term note (MTN) programme an expected rating of 'A(EXP)'. Huarong Finance 2017 Co., Ltd. is wholly owned by China Huarong International Holdings Limited (Huarong International), which is wholly owned by China Huarong Asset Management Co., Ltd. (China Huarong; A/Stable). The final rating on the proposed dual-currency notes is contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS China Huarong is credit-linked to the Chinese sovereign (A+/Stable) and rated one notch below the sovereign, reflecting the company's state ownership and strong control by the authorities. China Huarong's strategic ties with the state mean there is a strong likelihood the company would receive extraordinary support from the sovereign, if needed. The proposed notes under the MTN programme are unconditionally and irrevocably guaranteed by Huarong International. The notes will be senior unsecured obligations of Huarong International and will rank pari passu with all its other senior unsecured obligations. In place of a guarantee, China Huarong has granted a keepwell deed and a deed of equity interest purchase, investment and liquidity support undertaking to ensure Huarong International has sufficient assets and liquidity to meet its obligations under the guarantee for the securities under the MTN programme. The notes are rated at the same level as China Huarong's Issuer Default Rating (IDR) due to the strong link between China Huarong and Huarong International and because the keepwell deed and deed of equity interest purchase, investment and liquidity support undertaking transfer the ultimate responsibility of payment to China Huarong. In Fitch's opinion, both the keepwell deed and the deed of equity interest purchase, investment and liquidity support undertaking signal a strong intention from China Huarong to ensure Huarong International has sufficient funds to honour the debt obligations. The agency also believes China Huarong intends to maintain its reputation and credit profile in the international offshore market and is unlikely to default on offshore obligations. In addition, a default by Huarong International could have significant negative repercussions on China Huarong for any future offshore funding. China Huarong was established in 1999 and is one of four big asset-management companies approved and set up by the State Council to safeguard the country's economic and financial stability. RATING SENSITIVITIES Any rating action on China Huarong's IDR would result in similar action on the ratings of the programme and proposed notes. Positive or negative rating action on China Huarong's IDR could result from similar action on the sovereign. Stronger explicit support could lead to the ratings being aligned with those of the sovereign. Any significant dilution of China Huarong's core activities in the acquisition and management of non-performing assets could lead to wider notching. Significant changes to China Huarong's strategic importance or a dilution of the state's shareholding in the entity, resulting in a loss of control, or a change in the current approach applied, resulting in China Huarong no longer being classified as a dependent entity, could widen the notching down from the sponsor's rating. Contact: Primary Analyst Samuel Kwok Associate Director +852 2263 9961 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 Date of Relevant Rating Committee: 5 January 2017 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; 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 Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit Analysis (pub. 29 Feb 2016) here Additional Disclosures 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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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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