Fitch: Huarong's MTN Programme Rating Affirmed After Upsizing to USD11bn
OREANDA-NEWS. Fitch Ratings has affirmed Huarong Finance II Co., Ltd.'s medium-term note (MTN) programme's rating at 'A' following the increase of the programme amount to USD11bn from USD5bn. Fitch believes the upsize will not affect the programme's long-term rating, as the ratings are driven mainly by the ultimate parent company China Huarong Asset Management Co., Ltd. (China Huarong, A/Stable) and the creditworthiness of the China sovereign (A+/Stable).
Fitch also assigns Huarong Finance II Co., Ltd.'s proposed issue of US dollar senior unsecured notes under the programme an expected rating of 'A(EXP)'.
The final rating of the proposed US dollar notes are contingent upon the receipt of final documents conforming to information already received.
KEY RATING DRIVERS:
The notes under the MTN programme are unconditionally and irrevocably guaranteed by Huarong (HK) International Holding Limited (Huarong (HK) International), a wholly owned subsidiary of China Huarong. The notes will be senior unsecured obligations of Huarong (HK) International, and also rank pari passu with all other senior unsecured obligations of Huarong (HK) International.
In place of a guarantee, China Huarong has granted a keepwell and liquidity support deed and a deed of equity interest purchase undertaking to ensure that Huarong (HK) International has sufficient assets and liquidity to meet its obligations under the guarantee for the notes under the MTN programme.
The notes are rated at the same level as China Huarong's Issuer Default Rating (IDR), given the strong link between China Huarong and Huarong (HK) International and because the keepwell and liquidity support deed and deed of equity interest purchase undertaking transfer the ultimate responsibility of payment to China Huarong.
Fitch believes that both the keepwell and liquidity support deed and the deed of equity interest purchase undertaking signal a strong intention from China Huarong to ensure that Huarong (HK) 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. Furthermore, a default by Huarong (HK) International could have significant negative repercussions on China Huarong for any future offshore funding.
Fitch emphasises that the MTN programme's rating is for the programme in general and that there is no assurance that notes under the programme will be assigned a rating or that the rating assigned to a specific issue under the programme will have the same rating as that assigned to the programme.
China Huarong is one of four large national asset management companies (AMCs) established to mitigate financial risks, preserve state-owned assets, and promote the reform and development of China's financial system.
Any rating action on China Huarong's IDR would result in similar rating action on the programme and rated notes.