Jiuzhong Financial News, March 2, Fitch to Bank of China Financial Leasing Co., Ltd. (China Development Bank Financial Leasing Co., Ltd., referred to as "Bank of China Leasing", 01606.HKGet / stable) with a size of US $500m, coupon rate of 1.375%, notes due in 2024 and size of US $500m, coupon rate of 2%, the final rating of notes due in 2026 is "Aplus". The above notes are issued by CDBL Funding 2 under its $10 billion medium term Notes (MTN) program. The guarantee is provided by CDB Leasing (International) Company Limited (referred to as "CDB Leasing International"), and the maintenance agreement and asset purchase commitment agreement are provided by Bank of China lease.

CDBL Funding 2 is the core operation platform of offshore non-aircraft leasing business directly and wholly owned by CDB Leasing International. It is an overseas special purpose company registered in Hong Kong, China. The ultimate parent company of both is the China Development Bank (China Development Bank).

These notes are listed on the Hong Kong Stock Exchange and the proceeds will be used for working capital and general corporate purposes. The final rating of the note is consistent with the expected rating granted on February 25, 2021 and will be carried out upon receipt of a document consistent with the previous information. Fitch first awarded the BOC Leasing MTN program an "A +" rating on July 18, 2017 and recently confirmed it on January 13, 2020.

Key rating drivers

The final rating of the note is in line with the long-term issuer default rating (IDR) of BOC Lease, which is highly likely to support CDB Leasing International and its bills as assessed by Fitch. Secured instrument belongs to CDB Leasing International's direct, unconditional, non-subprime and unsecured debt, which is in the same order of payment as all other existing and future direct, unsecured, unsecured and non-subprime debt.

Given the high integration between CDB Leasing International and Bank of China Leasing, Fitch expects the former to have a high degree of support from its parent company. Fitch believes that if CDB Leasing International or its bills default, it will bring significant reputational risk to BOC Lease, while CDB, as a counterparty, generally regards CDB Leasing International as an integral part of BOC Lease.

The maintenance Agreement and the Asset purchase commitment Agreement will ensure that CDBL Funding 2 and CDB Leasing International have sufficient liquidity to meet their obligations under the secured notes and to maintain solvency and sustainability at all times. The asset purchase commitment agreement is an important mechanism for CDB Lease to provide foreign exchange liquidity to CDB Lease International, while the Weihao Agreement represents a "strong" tendency for BOC Lease to provide support to CDB Leasing International when needed.

The rating of BOC Leasing is based on Fitch's belief that the company, as a core subsidiary of CDB, is strongly supported by CDB. In addition, according to the regulations of the Insurance Regulatory Commission of the Bank of China and the articles of association of Bank of China Leasing, CDB should provide liquidity and financial support to the Bank of China when needed.

Rating sensitivity

Factors that may alone or jointly lead to positive rating actions / upgrades by Fitch include:

Unless there is a positive change in Fitch's view of CDB's rating, it is unlikely to take positive action on CDB Leasing International.

Factors that may alone or jointly cause Fitch to take negative rating action / downgrade include:

The rating of the secured note issued by CDBL Funding 2 will vary with the CDB Leasing International rating, which is linked to the rating of CDB and China's sovereign credit rating. The rating will also be downgraded if there is any sign of a weakening in the correlation between CDB Leasing International and BOC Leasing. This may be due to severe dilution of ownership or the reduction of CDB Leasing International's strategic position in the group.

Any regulatory change that causes BOC Lease to encounter practical difficulties in exercising the maintenance agreement and asset purchase commitment agreement to support CDB Leasing International could also trigger a bond downgrade.