OREANDA-NEWS. Fitch Ratings has assigned Changchun Urban Development & Investment Holdings (Group) Co., Ltd.'s (CCDG, BBB+/Stable) proposed issue of US dollar senior unsecured notes an expected rating of 'BBB+(EXP)'. The notes are to be issued by Chang Development International Limited, a wholly owned subsidiary of CCDG. CCDG will provide a guarantee to the notes.

CCDG says that the proceeds from the issuance will be used for the operation of certain subsidiaries of CCDG, potential acquisitions, and general corporate purposes. The final ratings are contingent upon the receipt of final documents conforming to information already received.

KEY RATING DRIVERS

CCDG will provide an unconditional and irrevocable guarantee. The notes will constitute a direct, unconditional, unsubordinated and unsecured obligation of CCDG, and will rank at least equally with all of CCDG's present and future unsecured and unsubordinated obligations.

The bonds are rated at the same level as CCDG's Issuer Default Rating (IDR), as the guarantee structure transfers the ultimate responsibility of payment to CCDG.

CCDG is credit-linked to Changchun Municipality. This is reflected in CCDG's 100% state ownership, strong municipal oversight on its financials and operations, integration with government's general account, and strategic importance of the entity's operation to the municipality. These factors result in a strong likelihood of extraordinary support to CCDG from the municipality, if needed.

CCDG is the largest integrated platform and strategic arm of Changchun Municipality, which uses the company to develop key municipal infrastructure projects - for primary development of land, to build affordable social housing, and to provide water supply and sewage treatment. It plays an important role in implementing the city's development blueprint drawn up by the municipal government.

The Changchun municipal government has been injecting the city's major urban development companies and water supply company into CCDG since it was established in 2013. Fitch believes that CCDG's debt will be ultimately serviced by the municipal government via subsidies and capital injections.

CCDG's board members are appointed by the Changchun Municipality, and its major projects need government approval. The group's financing plan and level of indebtedness are closely monitored by the municipality. CCDG is also required to report its operational and financial results to government on a regular basis.

RATING SENSITIVITIES
Any rating action on CCDG's IDR would result in similar rating action on the rated notes.

An upgrade of Fitch's credit view on Changchun Municipality, as well as a stronger or more explicit commitment of support from the municipality, may trigger positive rating action on CCDG.

Significant weakening of CCDG's strategic importance to the municipality, dilution of the municipality's shareholding, and/or reduced explicit and implicit municipality support, may result in a downgrade. A downgrade could also stem from weaker fiscal performance or increased indebtedness of the municipality, leading to deterioration in the municipality's creditworthiness.