Original title: Moody's: medium term Note Scheme for CICC Hong Kong "(P) Baa1/ (P) Pmur2" rating Source: duration Finance
This article is from Moody's Ratings.
On January 22, 2020, Moody's Investor Service has awarded (P) Baa1's long-term Advanced unsecured Notes Program rating and (P) Pmuri 2 short-term Advanced unsecured Notes Program rating to the medium-term Notes Program established by CICC Hong Kong Finance 2016 MTN Limited.
CICC Hong Kong Finance 2016 MTN Limited is incorporated in the British Virgin Islands and is a direct wholly-owned subsidiary of China International Capital (Hong Kong) Limited (CICC Hong Kong, Baa1/ Stability), which is a direct wholly-owned subsidiary of China International Capital Co., Ltd. (China International Capital Corporation, Baa1/ Stability).
The main rating of CICC Hong Kong Finance 2016 MTN Limited is expected to be stable.
Rating motivation
(P) the rating of the Advanced unsecured medium term Notes Scheme of Baa1/ (P) Pmur2 is at the same level as that of the issuer of CICC Hong Kong as the notes issued under the Scheme are guaranteed unconditionally and irrevocably by CICC Hong Kong.
The payment obligations under this guarantee will be at least the same as other existing and future unsecured and non-subprime obligations of CICC Hong Kong at all times. As a result, Moody's has a rating of (P) Baa1/ (P) Pmur2 on the above medium term Note Scheme, which is at the same level as the issuer rating of CICC Hong Kong.
In addition, the medium-term note plan is also supported by the maintenance agreement provided by China International Capital Corporation. CICC's Hong Kong Baa1's long-term issuer rating reflects its Ba1's individual credit rating and three child upgrades based on Moody's expectation that it will receive a very high level of support from its parent, China International Capital Corporation, if necessary. Moody's believes that CICC Hong Kong is an entity with a high degree of coordination and integration with its parent company.
The rating of the medium-term Notes Plan does not automatically apply to stand-alone notes issued under the Plan. Moody's will review the terms and conditions of the supplementary pricing agreement and award ratings to independent notes issued under the plan.
If the principal or interest payment of a note is variable and depends on the occurrence of non-credit-related events or the performance of an index (non-credit-related notes), Moody's has no intention of awarding a rating to such instruments. The only exception is notes in which principal and interest payments are affected by standard variants (standard sources of variation).
Factors that can promote the upgrading of ratings
Notes issued under the medium term Note Scheme are guaranteed unconditionally and irrevocably by CICC Hong Kong. As a result, the factors that could lead to an upgrade of CICC's Hong Kong rating will also contribute to the upgrade of the medium-term note plan.
If China International Capital Corporation is upgraded, CICC Hong Kong, its highly co-ordinated integrated entity, may also be upgraded.
If the following circumstances occur, China International Capital Corporation's rating may be upgraded: (1) the company continues to improve its funding sources and liquidity indicators; (2) maintain good profitability despite increased competition and market volatility; (3) reduce the volatility of its pre-tax earnings; (4) ensure a smooth integration with China CICC Fortune Securities Co., Ltd. (formerly CIC Securities Co., Ltd.).
In addition, if the operating environment of Chinese securities companies is significantly improved, China International Capital Corporation's rating may also be upgraded, which will be reflected in (1) a significant increase in the maturity of China's capital market. including a more robust regulatory mechanism, lower volatility and a higher proportion of institutional investors; or (2) increased industry concentration increases the pricing power of leading companies.
Factors that can lead to a downgrade
The factors that could lead to the downgrade of CICC's Hong Kong rating will also contribute to the downgrade of the medium-term note plan.
The rating of CICC Hong Kong may be downgraded if: (1) Moody's assessment of CICC Hong Kong is becoming more and more independent of China International Capital Corporation; or (2) the willingness and ability of the parent company or the Chinese government (A1 / stability) to support is diminished.
The total assets of China International Capital (Hong Kong) Co., Ltd. at the end of 2018 was HK $64 billion.