Fitch Rates Huarong's USD Notes Under MTN Programme 'A(EXP)'
China Huarong Asset Management Co., Ltd. (China Huarong; A/Stable) plans to use the proceeds of the proposed note issue as working capital and for general corporate purposes.
The final ratings on the proposed US dollar notes are contingent upon the receipt of final documents conforming to information already received.
KEY RATING DRIVERS
The notes will be unconditionally and irrevocably guaranteed by China Huarong International Holdings Limited (Huarong International; previous name: Huarong (HK) International Holding Limited), a wholly owned subsidiary of China Huarong. They are issued under China Huarong's MTN programme, and will be senior unsecured obligations of Huarong International and rank pari passu with all other senior unsecured obligations of Huarong International.
In place of a guarantee, China Huarong has granted a keepwell deed and a deed of equity interest purchase, investment and liquidity support undertaking to ensure that Huarong 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 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.
In Fitch's opinion, 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 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. Additionally a default by Huarong International could have significant negative repercussions on China Huarong for any future offshore funding.
China Huarong was established in 1999 and is one of four big asset management companies (AMCs) approved and set up by the State Council to safeguard the country's economic and financial stability. China Huarong had the largest consolidated balance sheet size and the highest net profit in 2014 among the big four national AMCs.
Any rating action on China Huarong's IDR would result in similar rating action on the MTN programme and rated notes.