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Fitch Affirms Beijing Infrastructure Investment at 'A+'/Stable
November 28, 2017 / 8:58 AM / 16 days ago

Fitch Affirms Beijing Infrastructure Investment at 'A+'/Stable

(The following statement was released by the rating agency) HONG KONG, November 28 (Fitch) Fitch Ratings has affirmed Beijing Infrastructure Investment Co., Ltd's (BII) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'A+' and Short-Term Foreign-Currency IDR at 'F1'. The Outlook of the long-term ratings is Stable. BII's ratings are credit-linked to Fitch's internal assessment of the creditworthiness of Beijing municipality, the capital of China. This is reflected in BII's 100% municipal ownership, strong municipal government oversight and supervision, multi-year-funding integration with the municipal budget and strategic importance of BII's urban rail operation to the city. These factors indicate a strong likelihood of extraordinary support, if needed. Therefore, BII is classified as a credit-linked entity under Fitch's criteria for Rating of Public-Sector Entities. Fitch has also affirmed the ratings on BII's medium-term note programme and the notes issued by Eastern Creation Investment Holdings Ltd and Eastern Creation II Investment Holdings Ltd., which are unconditionally and irrevocably guaranteed by Beijing Infrastructure Investment (Hong Kong) Limited (BII HK), a wholly owned subsidiary of BII. In place of a guarantee, BII has granted a keepwell and liquidity support deed and a deed of equity interest purchase undertaking to ensure BII HK has sufficient assets and liquidity to meet its obligations under the note guarantee. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS Beijing's Strong Creditworthiness: Beijing ranks second among all cities in China in terms of gross regional product. The municipality has a robust budgetary performance, a strong and well-diversified socio-economic profile, and a close relationship with the China sovereign (A+/Stable) owing to its status as the capital. These strengths are mitigated by its moderately high municipal-related debts and contingent liabilities arising from its public-sector entities. Legal Status Attribute Mid-Range: BII is registered as a local state-owned limited liability company under Chinese company law and can be liquidated. It is wholly owned by Beijing State-Owned Assets Supervision and Administration Commission and is supervised by the Beijing municipal government. Strategic Importance Attribute Stronger: BII is Beijing's sole urban rail transport operator and, as such, executes the municipality's rail transportation policy. Underground rail transport has become the key solution in solving the city's traffic problems. Therefore, BII is integral to the functioning and sustainable development of Beijing municipality. Control Attribute Stronger: BII's rail network development plan needs approval from the central government's National Development and Reform Commission. BII's financing plan and debt level are also closely monitored by the municipality. BII is also required to regularly report its operational and financial results to the municipality. Integration Attribute Stronger: BII receives municipal subsidies to cover operating deficits because its major role in Beijing's urban transport system renders it "socially necessary". The municipality is committed to provide CNY29.5 billion a year in capital grants from 2016-2045 to cover BII's funding needs for its rail network expansion plan and subsidies. Standalone Credit Profile: BII's standalone credit profile is weaker than its rating level due to the public-service nature of its activities and its high leverage. Fitch takes a top-down approach to rating BII because the agency sees a strong likelihood of BII receiving extraordinary state support, if needed, due to BII's strong strategic link to Beijing and municipal oversight of the entity. RATING SENSITIVITIES Links with Municipality: Significant changes to BII's strategic importance, a dilution of municipal shareholding to below 75%, or reduced explicit and implicit municipal support could lead to a wider gap between BII's rating and Fitch's assessment of Beijing municipality's creditworthiness. Municipality's Creditworthiness: Negative rating action could stem from a weaker fiscal performance or heightened indebtedness of the municipality. This could lead to a lowering of Fitch's internal assessment of Beijing's creditworthiness and, as a result, of BII's ratings. The full list of rating actions is as follows: BII Long-Term Foreign-Currency IDR affirmed at 'A+'; Outlook Stable Short-Term Foreign-Currency IDR affirmed at 'F1' Long-Term Local-Currency IDR affirmed at 'A+'; Outlook Stable Eastern Creation Investment Holdings Ltd USD300 million 3.625% senior unsecured notes due 2019 affirmed at 'A+' Eastern Creation II Investment Holdings Ltd USD6 billion medium-term note programme affirmed at 'A+' USD700 million 2.750% senior unsecured notes due 2020 affirmed at 'A+' USD300 million 3.250% senior unsecured notes due 2020 affirmed at 'A+' EUR500 million 1.000% senior unsecured notes due 2018 affirmed at 'A+' Contact: Primary Analyst Fan Gao Analyst +852 2263 9960 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Terry Gao Senior Director +852 2263 9972 Committee Chairperson Christophe Parisot Managing Director +33 1 44 29 91 34 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. 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