Hong Kong, November 06, 2017 -- Moody's Investors Service has assigned a first-time A2 issuer rating
to China Jianyin Investment Limited (JIC).
At the same time, Moody's has assigned a A2 senior unsecured rating
to the proposed notes to be issued by JIC Zhixin Limited and guaranteed
by JIC.
The ratings outlook is stable.
RATINGS RATIONALE
JIC's A2 issuer rating incorporates its baa2 baseline credit assessment
(BCA) and a three-notch uplift based on Moody's assessment
of a high level of support from the Government of China (A1 stable) to
JIC in times of need.
Moody's high support assessment reflects the following factors:
1) JIC's 100% ultimate ownership by the Chinese government
through China Investment Corporation (CIC);
2) JIC's status as an important investment platform of the Chinese
sovereign wealth fund under CIC;
3) JIC's unique background and close linkage with the central government,
as indicated by its use as a vehicle by the government to bailout and
restructure underperforming securities and trust companies in the financial
service industry; and
4) The strong track record of support from the Chinese government to JIC,
such as the provision of funding in past policy mandates.
The BCA of baa2 is underpinned by JIC's low leverage — as
measured by market value-based leverage (MVL) — strong liquidity
profile, and its prudent investment and financial management.
"The BCA is, however, constrained by the credit contagion
risk from its major investees, its evolving investment portfolio
and execution risk from new investments, as well as high business
and geographic concentration," says Gloria Tsuen, a
Moody's Vice President and Senior Analyst.
Moody's views JIC as an investment holding company, involved in
active investment and disposal activities, with an estimated adjusted
portfolio value of around RMB92 billion at the end of 2016.
JIC's current investment portfolio is heavily weighted by investees
in the financial service sector, such as Shenwan Hongyuan Group
Co., Ltd., JIC Leasing Company Limited and JIC
Trust Co., Ltd., which together accounted for
49% of its total adjusted portfolio value. JIC's current
investments also show a high geographic concentration in China.
Nevertheless, its investment portfolio is evolving, because
the company plans to increase its exposure to non-financial industries,
including sectors that are aligned with the Chinese government's
industry policies, or overseas targets that have potential linkages
to and synergies with the Chinese market.
JIC's prudent investment approach and sound risk management practices
can mitigate the execution risk from its new investments. For example,
the company has refrained from expanding aggressively, despite its
abundant financial sources. It also demonstrates well-established
processes for investment decisions and investment management.
"JIC has maintained a solid financial profile at the holding company
level," adds Tsuen. "It had a low MVL of around
8.5% at the end of 2016, and it will likely increase
its investment scale, such that its MVL will weaken moderately to
around 14%-15% over the next 2-3 years."
Moody's also expects that JIC's holding company will receive
cash dividends and interest of around RMB2 billion — excluding potential
new investments — and stable rental income from investment properties
of around RMB450 million every year. JIC's funds from operation
(FFO) interest coverage will register around 4x-5x over the next
two years which, together with its low MVL, position JIC's
BCA at the baa2 level.
JIC has a solid liquidity profile, supported by its holding of around
RMB2 billion in cash and around RMB16 billion in liquid financial assets,
which comprise mostly bank wealth management products and trust products
with short maturity profiles. As for its debt, it does not
have any debt maturing until 2020. JIC also has sound access to
bank credit and the capital markets, because of its state-owned
background.
Moody's says that JIC has the propensity to support its key investees,
such as the trust and leasing businesses that it manages with controlling
stakes, and its new strategic investments, such as SGD Pharma,
a company whose debt obligations are guaranteed by JIC. These investees
show weaker credit quality than JIC on a standalone basis, but this
situation is mitigated by JIC's solid financial and liquidity profiles.
The ratings outlook is stable, reflecting Moody's expectations
that over the next 12-18 months: (1) JIC's credit metrics
will be maintained at the levels that are appropriate for its BCA;
and (2) JIC's importance to the Chinese government and the government's
ability to provide support will remain intact, the latter of which
is mirrored in the stable outlook on the sovereign rating.
JIC's ratings will be upgraded if: (1) the Chinese government's
ability to support the company strengthens, a situation which would
be illustrated by an upgrade of China's sovereign rating; and (2)
at the same time, its BCA improves.
Evidence of an improvement in its BCA include: 1) lower-than-expected
credit contagion risk from its investees or execution risk from new investments;
2) material improvement in the business and geographic diversification
of its investment portfolio; and 3) adjusted MVL consistently below
10% and FFO interest coverage higher than 5.5x-6.0x.
JIC's ratings will be downgraded if: (1) the company's BCA
is much weaker than Moody's expects, a situation which could
result from aggressive debt-funded investments, or credit
contagion risk from its investees; 2) the Chinese government's ability
to support the company weakens, which would be illustrated by a
downgrade of China's sovereign rating; or 3) JIC's strategic
importance to China Investment Corporation and the government weakens.
Credit metrics indicative of downward pressure on its BCA include adjusted
MVL in excess of 20% or FFO interest coverage lower than 3.5x-4.0x.
The methodologies used in rating China Jianyin Investment Limited were
Investment Holding Companies and Conglomerates published in December 2015,
and Government-Related Issuers published in August 2017.
The principal methodology used in rating JIC Zhixin Limited was Investment
Holding Companies and Conglomerates published in December 2015.
Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
Established in 2004, China Jianyin Investment Limited is a wholly
state-owned investment holding company under the Chinese State
Council — through the China Investment Corporation and China Central
Huijin Corporation — and supervised by the Ministry of Finance.
JIC's investment portfolio had an estimated adjusted portfolio value
of around RMB92 billion at the end of 2016. Its investments include
companies in the financial services, advanced manufacturing,
information technology, healthcare, culture and consumer products
sectors.
The Local Market analyst for this rating is Kai Hu, +86 (21)
2057-4012.
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.
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
Vice President - Senior Analyst
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
