Fitch has assigned
The Outlook is Stable. Fitch has also assigned ChalcoHK a foreign-currency senior unsecured rating of 'A-'.
The agency has simultaneously affirmed the 'A-' rating on Chalco's US dollar notes and the 'BBB+' rating on the senior perpetual securities, which were issued by
ChalcoHK is Chalco's sole offshore financing platform and primary overseas investment-holding company, and its ratings are supported by strong linkages with its parent, in line with Fitch's Parent and Subsidiary Linkage (PSL) Rating Criteria. The ratings of Chalco are equalised with those of its parent,
KEY RATING DRIVERS
Chalco's Strong Linkage to
ChalcoHK's Strong Linkage to Chalco: ChalcoHK is highly integral to Chalco's financing strategy and is positioned as Chalco's sole offshore financing platform. The majority of ChalcoHK's debts, including its senior perpetual bond and senior unsecured bond, are raised to support Chalco's business operations and Chalco provides credit enhancement, including keepwell and EIPU deeds. Chalco regards ChalcoHK as a core subsidiary, appointing management and driving key decisions. We expect a default by ChalcoHK to create significant reputational risks for Chalco and jeopardise access to funding, as counterparties see ChalcoHK as an integral part of Chalco.
ChalcoHK is Chalco's primary overseas investment-holding company and owns most of Chalco's overseas mining projects, including Chalco's largest bauxite mine, the Boffa project in
We believe ChalcoHK's financial performance is driven mainly by the support from Chalco.
Fitch's Key Assumptions Within Our Rating Case for Chalco:
Revenue to increase from
EBITDA margin of 6.1% in 2020 and 2021, increasing to 7.7% in 2022;
No major M&A and asset or capital injections.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on the Chinese sovereign;
Increased likelihood of state support to
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Negative rating action on the Chinese sovereign;
Decreased likelihood of state support to
Weakening linkages between
Weakening linkages between Chalco and ChalcoHK.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
LIQUIDITY AND DEBT STRUCTURE
Liquidity Supported by Chalco: We expect Chalco to provide necessary liquidity support to ChalcoHK because of the strong linkage between the two entities.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ENTITY/DEBT RATING PRIOR
Chalco Hong Kong LimitedLT IDR A- New Rating
LT A- New Rating
LT A- Affirmed A-
LT BBB+ Affirmed BBB+
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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