Hong Kong, March 02, 2020 -- Moody's Investors Service has affirmed China Jianyin Investment
Limited's (JIC) A2 issuer rating and the A2 senior unsecured rating
of the notes issued by JIC Zhixin Limited and guaranteed by JIC.
The rating outlook 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 that the company will (1) receive a
high level of support from, and (2) show a 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,
and prudent investment and financial management.
Moody's expects the company's leverage, as measured by net
debt/market value-based portfolio value (MVL), to remain
stable at around 24%-27% over the next 12-18
months. Moody's expectation includes around RMB4-RMB5
billion in aggregated equity investment in 2019-20.
This level of MVL is higher than the last four-year average of
10%, partly due to JIC using idle cash of around RMB20 billion
to invest in short-term liquid assets. These assets are
mostly fixed income products or wealth management products with short
tenors. For conservative reasons, Moody's excludes
these liquid investments in calculating net debt. Incorporating
these short-term investments will lower MVL to below 15%.
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 investment properties.
As a result, 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 the credit contagion
risk from its major investees, evolving investment portfolio,
the execution risk from new investments, and high business and geographic
concentration.
The issuer rating also factors in JIC's low environmental and social
risks.
In assessing JIC's governance risk, Moody's takes into consideration
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 demonstrates a prudent investment
approach and sound risk management. The company has refrained from
expanding aggressively, despite its abundant financial resources.
Despite its unlisted status, JIC - as a domestic bond issuer
- regularly discloses its financial information.
The stable outlook reflects Moody's expectation that: (1)
over the next 12-18 months, JIC's credit metrics will be
maintained 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 to the company, will
remain intact; which is in turn reflected by the stable outlook on
the sovereign rating.
Moody's will 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.
Evidence of an improvement in the company's BCA includes: a 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 upgrade pressure on JIC's BCA include
MVL consistently below 10%-15% and FFO interest coverage
of more than 5.0x, both on a sustained basis.
Moody's would downgrade JIC's ratings if the Chinese government's
ability to support the company weakens, which would be illustrated
by a downgrade of China's sovereign rating, JIC's strategic
importance to CIC and the government weakens, or 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 downgrade pressure on its BCA include MVL
in excess of 25%-30% or FFO interest coverage lower
than 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 Government-Related
Issuers Methodology published in February 2020. 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 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.
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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
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