Announcement: Moody's publishes new methodology for rating local government financing vehicles (LGFVs) in China
Global Credit Research - 29 Jul 2020
Hong Kong, July 29, 2020 -- Moody's Investors Service has published a new methodology for rating local government financing vehicles (LGFVs) in China titled "Local Government Financing Vehicles in China Methodology."
In this methodology, Moody's defines LGFVs and describes how it will assess the credit risk of LGFVs using a top-down analytical approach primarily based on governmental support expectations. The two key components of the top-down analytical approach are governmental capacity to support and LGFV characteristics affecting support. Moody's expects a limited number of rating or outlook changes. Most of the rating changes would be limited to one notch, some upward and some downward.
For all rated government-related issuers (GRIs) owned by regional and local governments in China that do not meet Moody's definition of an LGFV, Moody's will continue to use an approach based on a standalone assessment, the Baseline Credit Assessment (BCA), in combination with the Joint Default Analysis (JDA) approach described in Moody's GRI methodology.
The methodology implements the approach proposed in a Request for Comment (RFC) titled "Local Government Financing Vehicles in China: Proposed Methodology" dated 15 April 2020, which can be accessed via this link: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216256. Moody's received a total of nine comments submitted through our Request for Comment page in response to this Request for Comment for which three respondents requested confidentiality. As a result, six of the comments are available for viewing as explained in the Results of Consultation called "Local Government Financing Vehicles in China: Proposed Methodology," which can be accessed at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216259.
This press release is not intended to provide a summary of the methodology. For a full explanation, please consult "Local Government Financing Vehicles in China Methodology", now available on www.moodys.com and accessible at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216254.
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This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Ivan Chung Associate Managing Director Financial Institutions 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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