Fitch Rates MTN Notes by CCB Leasing's SPV at 'A(EXP)'
OREANDA-NEWS. Fitch Ratings has assigned CCBL (Cayman) 1 Corporation Limited's (CCBL (Cayman) 1) USD5bn medium-term-note (MTN) programme expected Long-Term and Short-Term Ratings of 'A(EXP)' and 'F1(EXP)' respectively. Fitch has also assigned an expected Long-Term rating of 'A(EXP)' to the senior unsecured US dollar notes to be issued under the MTN programme in May 2016.
The programme and notes are supported by a guarantee from CCB Leasing (International) Corporation Limited (CCBLI) and benefit from a keepwell and liquidity support-deed and deed of asset purchase undertaking provided by CCB Financial Leasing Corporation Limited (CCB Leasing, A/Stable).
CCBL (Cayman) 1 is an offshore special purpose vehicle (SPV) established by CCBLI, which functions as the primary overseas platform for CCB Leasing's aviation leasing business. CCBLI was established in 2014 and is wholly owned by China Construction Bank Corporation (CCB, A/Stable) through CCB International Innovative Investment Limited. CCB Leasing has full managerial and operational control over CCBLI based on a service agreement with CCB International Innovative Investment Limited.
Senior notes under the MTN programme will represent the issuer's direct, unconditional, unsecured and unsubordinated obligations and rank at least pari passu with the issuer's all other current and future direct, unsecured, unguaranteed and unsubordinated indebtedness. The notes' junior to senior obligations will be rated on a case-by-case basis in accordance with published criteria and after taking into consideration the notes' individual terms and conditions. Fitch reserves the right not to rate certain instruments issued under the programme, such as market-linked instruments.
The notes can only be issued from CCBL (Cayman) 1, but may be in any currency and tenor. CCBLI will use proceeds from the exchange-listed US dollar notes and any notes issued in the future for general corporate purposes. The issue amount and maturity structure will be finalised on settlement. The final rating is contingent on the receipt of final documents conforming to information already received.
KEY RATING DRIVERS
The rating on the MTN programme and USD notes issued by CCBL (Cayman) 1 primarily reflects Fitch's assessment of an extremely high probability of support from CCB Leasing to CCBLI and CCBL (Cayman) 1. The programme's ratings reflect the ratings expected to be assigned to senior notes issued under the programme. The ratings are in line with CCB Leasing's Long-Term Issuer-Default Ratings of 'A', which is driven by the support from the ultimate parent, CCB.
The notes issued under the MTN programme will be supported by an unconditional and irrevocable guarantee from CCBLI, which will make the notes direct, general and unsecured obligations of CCBLI. The notes will at all times rank at least pari passu with all of CCBLI's other present and future unsecured obligations.
The keepwell and liquidity support deed commits CCB Leasing to ensure CCBLI has sufficient liquidity to meet its obligation under the guaranteed notes, remains solvent and is a going concern at all times. Under the deed of asset purchase undertaking, CCB Leasing is required to repurchase CCBLI's assets if a triggering event occurs to ensure CCBLI can meet outstanding debt obligations under the guaranteed notes. A triggering event will occur if CCBLI does not have sufficient liquidity to meet its payment obligations or upon default.
The deed of asset purchase undertaking is an important mechanism allowing CCB Leasing to provide foreign-currency liquidity to CCBLI in a timely manner. CCB Leasing does not require approval from the State Administration of Foreign Exchange for these foreign currency transfers, because buying assets for leasing purposes is a part of CCB Leasing's operating activities sanctioned by the relevant authorities, including the China Banking Regulatory Commission.
There could be practical difficulties enforcing the keepwell and liquidity support deed, which is not as strong as a guarantee. Nevertheless, the deed suggests a strong propensity for CCB Leasing to support CCBLI, if required.