China Jianyin Investment Limited -- Moody's assigns A2 to new proposed USD notes guaranteed by China Jianyin
Rating Action: Moody's assigns A2 to new proposed USD notes guaranteed by China Jianyin
Global Credit Research - 18 Aug 2020
Hong Kong, August 18, 2020 -- Moody's Investors Service has assigned A2 senior unsecured ratings to two proposed USD senior unsecured notes to be issued by JIC Zhixin Limited, a wholly-owned subsidiary of China Jianyin Investment Limited (JIC, A2 stable). Both notes will be guaranteed by JIC.
JIC will use the proceeds from the proposed notes for refinancing and general corporate purposes.
The outlook on the ratings is stable.
RATINGS RATIONALE
JIC's A2 issuer rating is primarily driven by the company's baa2 Baseline Credit Assessment (BCA) and a three-notch uplift, based on Moody's expectation of high level of support from and very high dependence on the Government of China (A1 stable), in times of need.
This high support assessment is underpinned by JIC's (1) 100% ultimate ownership by the Chinese government through China Investment Corporation (CIC), (2) status as an important investment platform for the Chinese sovereign wealth fund under CIC, (3) close links with the Chinese government, and (4) strong track record of receiving government support.
JIC's baa2 BCA is underpinned by its strong liquidity profile, as well as prudent investment and financial management practices.
Moody's expects the company's leverage, as measured by estimated market value-based leverage (MVL), to remain stable at around 24%-27% over the next 12-18 months. Moody's expectation includes around RMB4-RMB5 billion in aggregate equity investments in 2020-21. Moody's also expects that JIC will receive cash dividends and interest of around RMB2.0-RMB2.5 billion and stable annual rental income of around RMB500 million from its investment properties. As a result, its funds from operation (FFO) interest coverage will stay at around 3.5x-4.0x over the next 12-18 months.
This projected leverage level and the interest coverage are appropriate for its BCA of baa2.
However, the company's BCA is constrained by (1) the credit contagion risk from its major investees, (2) its evolving investment portfolio, (3) the execution risks surrounding its new investments, and (4) its high business and geographic concentration.
The A2 senior unsecured ratings of the proposed notes reflect the unconditional and irrevocable guarantee from JIC.
The proposed notes will not materially increase JIC's overall debt level, because part of the proceeds will be used to refinance the company's existing debt.
The issuer rating also factors in JIC's low environmental and social risks.
In assessing JIC's governance risk, Moody's has considered its 100% effective ownership by the Chinese government. JIC is under the government's supervision and its management team is appointed by the government. JIC has demonstrated prudent investment practices and sound risk management. The company has refrained from expanding aggressively, despite its abundant financial resources. Although JIC is unlisted, as a domestic bond issuer it regularly discloses its financial information.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that: (1) over the next 12-18 months, JIC's credit metrics will stay at levels appropriate for its BCA, and (2) JIC's importance to the Chinese government, and Moody's expectation that the government's ability to provide support, which is in turn reflected in the stable outlook on the sovereign rating, will remain intact.
Moody's could upgrade JIC's ratings if (1) the Chinese government's ability to support the company through CIC strengthens, which would be illustrated by an upgrade of China's sovereign rating , and (2) the company's BCA improves.
The company's BCA could improve if there is lower-than-expected credit contagion risk from its investees or execution risk from new investments, and a material improvement in the business and geographic diversification of its investment portfolio.
Credit metrics indicative of an improvement in the BCA include MVL consistently below 10%-15% and FFO interest coverage above 5.0x, both on a sustained basis.
Moody's would downgrade JIC's ratings if (1) the Chinese government's ability to support the company weakens, which would be illustrated by a downgrade of China's sovereign rating, (2) JIC's strategic importance to CIC and the government weakens, or (3) the company's BCA is lowered, which would arise because of aggressive debt-funded investments or credit contagion risks from its investees.
Credit metrics indicative of a deterioration in the BCA include MVL above 25%-30% or FFO interest coverage below 2.5x-3.0x, both on a prolonged basis.
The methodologies used in these ratings were Investment Holding Companies and Conglomerates published in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1125855, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
China Jianyin Investment Limited (JIC) is fully owned by China Investment Corporation (CIC). JIC acts as CIC's important investment platform and is supervised by China's Ministry of Finance as well as CIC.
JIC's investments include companies in the financial services, advanced manufacturing, information technology, healthcare, cultural and consumer products sectors.
The local market analyst for these ratings is Yan Li, +86 (106) 319-6572 .
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entity is participating and the rated entity or its agent(s) generally provides Moody's with information for the purposes of its ratings process. Please refer to www.moodys.com for the Regulatory Disclosures for each credit rating action under the ratings tab on the issuer/entity page and for details of Moody's Policy for Designating Non-Participating Rated Entities.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.
Gloria Tsuen, CFA VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Gary Lau MD - Corporate Finance Corporate Finance Group JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077
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