Fitch Ratings-Taipei-07 January 2019: Fitch Ratings has assigned Bocom Leasing Management Hong Kong Company Limited's (Bocom Leasing Management HK, A/Stable) USD3 billion medium-term note (MTN) programme a final rating of 'A' and has assigned an expected rating of 'A(EXP)' to the proposed senior unsecured US dollar notes to be issued under the programme.
The proposed notes will constitute Bocom Leasing Management HK's direct, unconditional, unsubordinated and unsecured obligations and will rank pari passu with all its other present and future unsecured and unsubordinated obligations. The programme and the proposed notes will benefit from a keepwell and asset-purchase deed provided by Bocom Leasing Management HK's parent, Bank of Communications Financial Leasing Co., Ltd. (Bocom Leasing, A/Stable).
Bocom Leasing Management HK is the primary offshore platform for its parent's ship-leasing business. The company was established in 2015 and is wholly owned by Bocom Leasing through Bocom Aviation and Shipping Financial Leasing Company Limited. Bocom Leasing was established by Bank of Communications Co., Ltd. (Bocom; A/Stable) in 2007 as its wholly owned leasing subsidiary. Bocom Leasing is now the second-largest financial leasing company in China by managed assets, while Bocom is the country's fifth-largest state-owned commercial bank.
The MTN programme is listed on the Hong Kong Stock Exchange and the proceeds from proposed notes will be used for general corporate purpose, including investment in the leasing business of Bocom Leasing. The maturity structure of the proposed notes will be finalised upon settlement. The final ratings of notes are contingent upon the receipt of final documents conforming to the information already received. The assignment of the final rating on the MTN programme follows the receipt of documents conforming to information already received. The final rating is in line with the expected rating assigned on 6 January 2019.
KEY RATING DRIVERS
The ratings on the MTN programme and the proposed senior notes issued under the programme are in line with Bocom Leasing Management HK's Long-Term Issuer Default Rating (IDR) of 'A'. This reflects the extremely high probability of support from Bocom and Bocom Leasing to Bocom Leasing Management HK.
The keepwell and asset purchase deed commits Bocom Leasing to ensure Bocom Leasing Management HK has sufficient liquidity to ensure timely payment of any amount payable in respect of the proposed notes and to remain solvent and a going concern at all times. Under the asset purchase deed, Bocom Leasing is required to purchase assets held by Bocom Leasing Management HK upon the occurrence of a triggering event for Bocom Leasing Management HK to meet any outstanding debt obligation under the proposed notes. The repurchase agreements serve as an important mechanism to allow Bocom Leasing to provide foreign-currency liquidity to Bocom Leasing Management HK.
There could be practical difficulties enforcing the keepwell and asset purchase deed, which is not as strong as a guarantee. Nevertheless, the deed demonstrates a strong propensity for Bocom Leasing to support Bocom Leasing Management HK, if required.
RATING SENSITIVITIES
Any changes to the ratings on the programme and proposed notes issued under the programme will be directly correlated with changes in Bocom Leasing Management HK's IDR, which will in turn reflect any shift in the propensity or ability of Bocom and Bocom Leasing to support Bocom Leasing Management HK, if required. Likewise, any change in the perceived willingness or ability of China's government to support Bocom and Bocom Leasing in a full and timely manner would affect the ratings on the programme and the proposed notes.
In addition, the rating on the programme and proposed notes issued under the programme will be downgraded if there is a significant adverse change in China's regulation that causes Bocom Leasing to encounter difficulties in exercising the keepwell and asset-purchase deeds to support Bocom Leasing Management HK.