Hong Kong, November 02, 2018 -- Moody's Investors Service ("Moody's") has assigned
a Baa3 senior unsecured rating to the proposed notes to be issued by Chengdu
High-Tech Investment Group Co. Ltd. (CDHT,
Baa3 stable).
The rating outlook is stable.
The proceeds from the notes will be used for the construction of projects
and as working capital of the issuer.
RATINGS RATIONALE
CDHT's Baa3 rating primarily combines (1) its ba3 baseline credit assessment
(BCA); and (2) Moody's assessment of a strong likelihood of support
from and high level of dependence on the Government of China (A1 stable)
when in need, which results in a rating that is three notches above
its BCA.
Moody's support assessment reflects CDHT's leading role in investing,
developing and operating the Chengdu High-tech Development Zone,
its ultimate 100% ownership by the Chengdu government, and
a track record of receiving government support.
The Chengdu High-tech Development Zone is ranked among the top
10 state-level high-tech development zones in China,
and is economically important to Chengdu City and Sichuan Province.
The support assessment also considers the reputational and contagion risks
that may arise if it were to default, given CDHT's status as the
largest government-owned entity in the Chengdu High-tech
Development Zone, which is of strategic importance to the province.
As such, Moody's believes the central government would support efforts
by the Chengdu government and the Sichuan government to prevent CDHT from
defaulting and thus avoid disruption to the domestic financial market.
This support can take various forms, including government subsidies,
capital or asset injections, as well as loans from policy and state-owned
banks.
CDHT's BCA is driven by its diversified revenue sources and product mix
to mitigate the volatility of industrial property development, by
its limited business risk due to its monopoly market position in the high-tech
development zone, and by its good access to domestic funding.
These credit strengths are partly offset by the company's elevated debt
leverage in 2018-2019 due to its large capital spending needs for
the development of talent apartments.
Moody's forecasts adjusted (FFO from nongovernment transactions
+ government cash payments + interest)/interest will stay in
the range of 1.9x to 2.1x over the next 12 to 18 months,
supported by revenue and cash flow from the scheduled completion of most
talent apartments.
The stable outlook reflects (1) the stable outlook on China's sovereign
rating; and (2) the consideration that CDHT's BCA is appropriately
positioned at the current level.
Moody's could upgrade the rating if: (1) the likelihood of
support for CDHT increases, and/or (2) CDHT's standalone credit
profile improves significantly.
Moody's could raise CDHT's BCA if the company's business or financial
profile improves. Credit metrics indicative of upward pressure
on its BCA include adjusted (FFO from non-government transactions
+ government cash payments + interest)/interest exceeding 3.0x
on a sustained basis.
Moody's could downgrade the rating if: (1) the likelihood
of support for CDHT decreases, and/or (2) CDHT's standalone credit
profile weakens meaningfully.
Moody's could lower CDHT's BCA if its business or financial profiles
deteriorate materially. Credit metrics indicative of a potential
downgrade of the BCA include adjusted (FFO from non-government
transactions + government cash payments + interest)/interest
below 1.8x-2.0x on a sustained basis.
The methodologies used in these ratings were Homebuilding And Property
Development Industry published in January 2018, and Government-Related
Issuers published in June 2018. Please see the Rating Methodologies
page on www.moodys.com for a copy of these methodologies.
Chengdu High-Tech Investment Group Co. Ltd. is 100%
owned by the Chengdu High-tech Zone Administrative Committee under
the Chengdu government. The company is mandated by the Chengdu
government to develop and operate the Chengdu High-tech Development
Zone, mainly including infrastructure construction, the development
of talent apartments, as well as the provision of industrial and
office properties for companies moving into the development zone.
The company also engages in some commercial activities, including
construction, commercial property development, merchandising,
financial services and industrial investments.
The local market analyst for this rating is Cindy Yang, +86
(10) 63196570.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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
Clement Wong
Associate Managing Director
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
