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Fitch Publishes China Great Wall Asset Management's Rating of 'A'; Outlook Stable
October 18, 2016 / 9:57 AM / a year ago

Fitch Publishes China Great Wall Asset Management's Rating of 'A'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG, October 18 (Fitch) Fitch Ratings has published China Great Wall Asset Management Corporation's (China Great Wall) Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'A' with a Stable Outlook. Fitch has also assigned China Great Wall International Holdings III Limited's (GWIII) proposed medium-term note (MTN) programme and the proposed first issue of US dollar senior unsecured notes under the programme expected ratings of 'A(EXP)'. The proceeds of the proposed note issue will be used for general corporate purposes. The final ratings on the proposed MTN programme and the proposed notes are contingent upon the receipt of final documents conforming to information already received. The notes under the MTN programme, which will be issued by GWIII, are unconditionally and irrevocably guaranteed by Great Wall Pan-Asia International Investment Co., Limited (GWIIHK), a wholly owned subsidiary of China Great Wall. The notes under the MTN programme will be senior unsecured obligations of GWIIHK and rank pari passu with all other senior unsecured obligations of GWIIHK. In place of a guarantee, China Great Wall has granted a keepwell deed and a deed of equity interest purchase, investment and liquidity support undertaking to ensure that the guarantor, GWIIHK, has sufficient assets and liquidity to meet its obligations under the guarantee for the notes under the MTN programme. The notes under the MTN programme are rated at the same level of the IDR of China Great Wall, given the strong link between GWIIHK and China Great Wall, and the keepwell deed and deed of equity interest purchase, investment and liquidity support undertaking, which provide additional support and transfer the ultimate responsibility of payment to China Great Wall. In Fitch's opinion, the deeds signal a strong intention from China Great Wall to ensure that GWIIHK has sufficient funds to honour the debt obligations. The agency also believes GWIIHK intends to maintain its reputation and credit profile in the international offshore market, and is unlikely to default on offshore obligations. Additionally a default by GWIIHK could have significant negative repercussions on China Great Wall for any future offshore funding. KEY RATING DRIVERS Ratings Linked to Sovereign: China Great Wall's ratings are credit-linked to those of the Chinese sovereign (A+/Stable) and notched down once. This reflects China Great Wall's state-ownership and strong control by the authorities. China Great Wall's strategic ties with the state means there is a strong likelihood that the company would receive extraordinary support from the government, if needed. Legal Status Attributes Midrange: China Great Wall is registered as a wholly state-owned non-bank financial institution under China's company law. The Ministry of Finance (MoF) has 100% ownership of China Great Wall and plans to introduce strategic investors and a public listing. The plan is the same for all four China's state-owned asset management corporations (AMCs). Fitch expects the MoF to maintain a controlling stake in China Great Wall after the shareholding restructuring, which Fitch expects to be completed by early 2017. Strategic Importance Attributes Stronger: Fitch considers China's four largest AMCs to be groups with insignificant individual differentiation and highly necessary to absorb distressed debts. They are also instruments the government uses to avoid systemic risk and maintain confidence in the banking sector. In Fitch's view, the state is highly likely to provide strong support to the company to ensure the stability of the financial market. Fitch does not believe the rapid expansion of China Great Wall's non-policy business through natural growth negatively affects the company's strategic importance as long as it remains a key player in its core business. State Control Attributes Stronger: China Great Wall is directly controlled by the MoF and subject to the regulation and supervision of the China Banking Regulatory Commission (CBRC). The company's senior management is scrutinised and appointed by CBRC, which also has significant influence over the company's operations through industry and business-activity supervision. Integration Attributes Midrange: The size of China Great Wall's balance sheet is limited compared with China's budget and the company does not receive on-going subsidies or capital injections from the government. China Great Wall's financial liabilities at end-2015 accounted for less than 1% of China's GDP. The People's Bank of China granted China Great Wall a low-interest loan for its acquisition of policy non-performing assets in the past. Capital Adequacy: China Great Wall has adequate risk and capital adequacy controls. After the shareholding restructuring led by MoF for all the four largest AMCs, Fitch expects China Great Wall's capital adequacy ratio to increase further due to the increase in shareholder capital. RATING SENSITIVITIES Positive or negative rating action on the sovereign rating could result in similar changes to China Great Wall's ratings. Stronger explicit support could lead to ratings being aligned with the sovereign rating. Any significant dilution of China Great Wall's core activities in the acquisition and management of non-performing assets could lead to wider notching down from the sovereign's rating. This could also happen if there are significant changes to China Great Wall's strategic importance to the state or if the state loses its controlling stake in the company and results in the company no longer classified as credit-linked to the state. Any rating action on China Great Wall's IDR would result in similar rating action on the programme and rated notes. 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 Director +852 2263 9972 Committee Chairperson Guido Bach Senior Director +49 69 768 076 111 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 _id=1013284 Solicitation Status here 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. 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 © 2016 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. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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