Fitch: Yunnan Provincial Investment's Rating Unaffected by Probe
OREANDA-NEWS. Fitch Ratings does not expect the investigation into Yunnan Provincial Investment Holdings Group Co. Ltd.'s (YIG, BBB+/Stable) chairman to have any immediate impact on the ratings of the company as YIG's rating is underpinned by its strategic importance to the Yunnan provincial government and hence the support from the provincial government.
YIG's chairman, Mr. Bao Minghu, is being investigated by Yunnan's Provincial Commission for Discipline Inspection for alleged violations, according to an announcement on 14 April 2016 on the commission's website. YIG said that based on current information the investigation is related to personal matters of Mr. Bao, and the newly appointed acting chairman does not expect it to negatively affect the operations of YIG and the provincial government's support for the company. The management believes all pledged government support will not be affected as a result of the investigation.
Fitch will closely monitor the developments in the investigation and assess the potential impact on YIG's credit accordingly.
Fitch is of the view that YIG's rating could come under pressure should the investigation reveal widespread corporate governance issues and result in the deterioration of YIG's strategic importance to the provincial government. The rating could be downgraded if the incident results in any significant subsidiaries being spun off from YIG or scaling back of government support.
The ratings of Yunnan Provincial Energy Investment Group Co. Ltd. (YEIG, BBB/Stable) are also not immediately impacted by the investigation. Fitch currently views parental support for YEIG as coming from its ultimate 97.18% parent, the Yunnan State-owned Assets Supervision and Administration Commission (SASAC). The ratings on YEIG are credit linked to Fitch's internal credit assessment of Yunnan Province, as per Fitch's Parent and Subsidiary Linkage methodology. While YEIG has several immediate shareholders, including YIG and other Yunnan SASAC-owned companies, YEIG is effectively managed and controlled directly by Yunnan SASAC.