Hong Kong, November 12, 2021 -- Moody's Investors Service has assigned an A3 rating to the proposed
senior unsecured notes to be drawn down under the $10 billion medium-term
note (MTN) program issued by Sinochem Offshore Capital Company Limited
and guaranteed by Sinochem Hong Kong (Group) Company Limited (Sinochem
HK, A3 stable).
The outlook is stable.
Sinochem HK plans to use the proceeds from the notes to refinance its
offshore debts.
RATINGS RATIONALE
The A3 rating reflects the fact that the notes will rank pari passu with
all other senior unsecured obligations of Sinochem HK.
Sinochem HK's A3 issuer rating considers its standalone credit profile
and a four-notch uplift reflecting Moody's expectation of a high
likelihood of support from the Government of China (A1 stable) through
the company's ultimate parent, Sinochem Holdings Corporation
Ltd., when needed.
On 16 September 2021, Sinochem Group and China National Chemical
Corporation Limited (ChemChina, Baa2 stable) completed a share transfer
to Sinochem Holdings, which is fully owned by the State-owned
Assets Supervision and Administration Commission (SASAC) of the State
Council of China. Consequently, Sinochem HK has become ultimately
100%-owned by and managed as an integral part of Sinochem
Holdings.
The four-notch uplift reflects Sinochem HK's status as the overseas
treasury center of Sinochem Holdings. Sinochem HK plays an important
role in conducting offshore funding for the group and holds Sinochem Holdings'
equity interests in its listed real estate subsidiary, China Jinmao
Holdings Group Limited (Baa3 stable). Moody's views that
Sinochem HK's credit profile is closely linked with that of Sinochem
Holdings, and that Sinochem HK will continue to receive strong support
from its ultimate parent.
Sinochem Holdings has a strong capacity to provide support, reflecting
its solid standalone credit profile and Moody's expectation of very
high support from the Chinese government if needed. The company
is one of the largest comprehensive chemical enterprises globally in terms
of revenue and is the only central state-owned enterprise (SOE)
in China's chemical industry, with operations spanning over
150 countries.
Sinochem HK's standalone credit profile reflects the company's competitive
position in its property businesses through China Jinmao, and the
low counterparty risk of the intercompany loans from Sinochem HK to its
parent. As of the end of 2020, Sinochem HK's net intercompany
lending to its parent amounted to HKD11 billion, accounting for
around 8% of its total reported debt.
At the same time, Sinochem HK's standalone credit profile is constrained
by its moderate debt leverage, reflecting the financing needs of
its property businesses and the offshore borrowings on behalf of its parent.
Sinochem HK's leverage reflects that of its property business as
well as the offshore borrowing needs of its parent. Adjusted for
the borrowing for its parent, Moody's estimates that Sinochem
HK's leverage, as measured by debt/EBITDA, rose to 6.1x
in 2020 from 5.2x in 2019, driven by higher debt from the
property segment. Moody's expects the company's leverage
will decline to 5.0x-5.5x over the next 12-18
months, supported by expected faster revenue recognition and moderating
land acquisitions from China Jinmao. Such a level will be consistent
with Sinochem HK's standalone credit profile.
Sinochem HK's issuer rating also considers the following environmental,
social and governance (ESG) risks.
Sinochem HK's property businesses have limited exposure to environmental
and social risks. In terms of governance, as a key subsidiary
of an SOE, Sinochem HK is under the close supervision of the central
government through its parent. In addition, Sinochem HK has
adequate information disclosure as an active bond issuer, and its
key listed subsidiary, China Jinmao, also enhances its information
transparency at the subsidiary level.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that Sinochem HK's importance
to Sinochem Holdings will remain intact and that its debt leverage will
remain stable over the next 12-18 months.
Moody's could upgrade Sinochem HK's rating if Moody's assessment
of support from Sinochem Holdings to Sinochem HK remains unchanged,
and if Sinochem HK and Sinochem Holdings improve their debt leverage on
a sustained basis while managing growth prudently.
Credit metrics indicative of an upgrade of Sinochem HK's rating
include adjusted debt/EBITDA dropping below 5.5-6.0x
for Sinochem Holdings and below 4.0x for Sinochem HK, both
on a sustained basis.
Moody's could downgrade Sinochem HK's rating if Sinochem Holdings'
and Sinochem HK's business or financial profiles materially deteriorate,
without any material changes in Moody's assessment of support from
Sinochem Holdings to Sinochem HK.
Credit metrics indicative of a downgrade of Sinochem HK's rating include
adjusted debt/EBITDA rising above 7.5-8.0x for Sinochem
Holdings and above 6.0x for Sinochem HK, both on a sustained
basis, without any prospect of deleveraging.
In addition, Sinochem HK's rating could be downgraded if Moody's
expects a weakening in support, including a material decline in
the government's ownership in Sinochem Holdings or the group's ownership
in Sinochem HK, or a reduction in the strategic importance of Sinochem
HK to Sinochem Holdings.
The principal methodology used in these ratings was Homebuilding And Property
Development Industry published in January 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1108031.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Sinochem Hong Kong (Group) Company Limited (Sinochem HK) is the overseas
treasury center and investment vehicle of Sinochem Holdings, a state-owned
enterprise (SOE) wholly owned by the Chinese government. It is
responsible for financing in overseas markets for its parent's businesses
and holds investment assets on behalf of the parent group.
As of the end of October 2021, Sinochem HK was ultimately 100%
owned by Sinochem Holdings Corporation Ltd. According to its audited
financial statements, Sinochem HK reported total revenue of HKD67.8
billion and total assets of HKD498.5 billion in 2020.
The local market analyst for this rating is Jin Wu, +86 (212)
057-4021.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions in the disclosure form. Moody's Rating Symbols and
Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for
Designating and Assigning Unsolicited Credit Ratings available on its
website www.moodys.com.
Moody's considers a rated entity or its agent(s) to be participating when
it maintains an overall relationship with Moody's. Unless noted
in the Regulatory Disclosures as a Non-Participating Entity,
the rated entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of its ratings
process. Please refer to www.moodys.com for the Regulatory
Disclosures for each credit rating action under the ratings tab on the
issuer/entity page and for details of Moody's Policy for Designating Non-Participating
Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed by
Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main
60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed by
Moody's Investors Service Limited, One Canada Square, Canary
Wharf, London E14 5FA under the law applicable to credit rating
agencies in the UK. Further information on the UK endorsement status
and on the Moody's office that issued the credit rating is available on
www.moodys.com.
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.
Chenyi Lu
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
Client Service: 852 3551 3077
