Hong Kong, February 11, 2020 -- Moody's Investors Service has assigned a Baa1 rating to the proposed subordinated
perpetual securities to be issued by CCCI Treasure Limited and guaranteed
by China Communications Construction Co., Ltd. (CCCC,
A3, stable).
The proceeds of the proposed issuance will be used by CCCC to refinance
existing debt and for the company's general corporate purposes.
RATINGS RATIONALE
The Baa1 rating on the proposed subordinated perpetual securities reflects
the guarantee from CCCC, as well as the fact that the securities
are subordinated to the senior unsecured debt of CCCC, but rank
above CCCC's junior subordinated debt and common stock.
The securities issuance will not materially increase CCCC's debt leverage,
because the company will primarily use the proceeds to refinance existing
debt.
Moody's considers CCCC's proposed subordinated perpetual securities
as 100% debt-like, due to the high step-up
cost of 300 basis points after the first call date, with the cost
creating a strong incentive for the company to prepay the securities.
The Baa1 rating of the subordinated perpetual securities is one notch
lower than CCCC's senior unsecured rating to reflect the subordinated
status of the notes.
Moody's also estimates a low likelihood of CCCC deferring the coupon,
given the dividend suspension clause, as well as the company's
solid interest servicing capability and strong access to funding.
However, Moody's could lower the rating on the subordinated
perpetual securities if Moody's assesses that the company is likely to
defer a large number of coupon payments in advance of default.
CCCC's A3 rating incorporates its standalone credit strength and a three-notch
uplift to reflect Moody's expectation that the company will receive strong
support from its parent, China Communications Construction Group
(Limited) (CCCG), in times of stress.
For detailed rating rationales on CCCC, pls refer to Credit Opinion
dated 7 November 2019.
While the coronavirus outbreak is credit negative for the construction
sector in China, Moody's expects that the short term disruption
will have no material impact on CCCC's fundamental credit profile.
Moody's will continue to monitor the development and evaluate the
credit impact if the disruption is prolonged.
The stable outlook mirrors the stable outlook for CCCC.
Moody's could upgrade the rating on the subordinated perpetual securities
if Moody's upgrades CCCC's issuer rating.
Likewise, Moody's could downgrade the rating of the subordinated
perpetual securities if Moody's downgrades CCCC's issuer rating.
The principal methodology used in these ratings was Construction Industry
published in March 2017. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
Headquartered in Beijing, China Communications Construction Co.,
Ltd. (CCCC) is one of the largest transportation infrastructure
construction companies globally. CCCC reported total revenue of
RMB489 billion in 2018 and RMB240 billion for the first half of 2019.
CCCC is 58.4% owned by China Communications Construction
Group (Limited), which is a state-owned enterprise wholly
owned and supervised by the National State-owned Assets Supervision
and Administration Commission under the State Council of China.
The local market analyst for these ratings is Sue Su, +86 (10)
6319-6505.
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.
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.
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