Fitch Rates Jiangsu NewHeadLine's USD Notes Final 'BB+'
The assignment of the final ratings follows the receipt of documents conforming to information already received. The final ratings are in line with the expected ratings assigned on 28 August 2016.
KEY RATING DRIVERS
The notes are issued by a wholly owned subsidiary of Jiangsu NHL, ZHIYUAN Group (BVI) Co., Ltd., and are unconditionally and irrevocably guaranteed by HK Zhiyuan Group Limited (HKZY), also a wholly owned subsidiary of Jiangsu NHL. The notes are senior unsecured obligations of HKZY and rank pari passu with all its other obligations.
Jiangsu NHL has granted a keepwell and liquidity support deed and a deed of equity interest purchase undertaking in place of a guarantee to ensure HKZY has sufficient assets and liquidity to meet its obligations under the guarantee for the notes.
The notes are rated at the same level as Jiangsu NHL's Issuer Default Rating, due to the strong link between Jiangsu NHL and HKZY and because the keepwell and liquidity support deed and deed of equity interest purchase undertaking transfer the ultimate responsibility of payment to Jiangsu NHL.
Fitch sees the keepwell and liquidity support deed and the deed of equity interest purchase undertaking as signalling a strong intention from Jiangsu NHL to ensure HKZY has sufficient funds to honour the debt obligations. The agency also believes Jiangsu NHL intends to maintain its reputation and credit profile in the international offshore market and is unlikely to default on its offshore obligations. In addition, a default by HKZY could have significant negative repercussions on Jiangsu NHL for any future offshore funding.
Jiangsu NHL's ratings are credit-linked to Lianyungang Municipality, located in China's north-eastern Jiangsu Province. This is reflected in the 100% state-ownership of Jiangsu NHL, strong municipal oversight of its financials and strategic importance of the entity's operation to the municipality.
Any rating action on Jiangsu NHL will result in similar rating action on the rated bonds issued by ZHIYUAN Group (BVI) Co., Ltd.
An upgrade of Fitch's credit view on Lianyungang Municipality, as well as a stronger or more explicit support commitment from the municipality, may trigger positive rating action on Jiangsu NHL.
Significant weakening of Jiangsu NHL's strategic importance to the municipality, dilution of the municipality's shareholding to below 75% or reduced explicit and implicit municipality support may result in a downgrade. A downgrade could also result from a weaker fiscal performance or increased indebtedness of the municipality, leading to deterioration in the sponsor's internally assessed creditworthiness and, as a result, of Jiangsu NHL's ratings.