CHINA CINDA ASSET MANAGEMENT CO., LTD.
Fitch Ratings has affirmed
The Outlook is Stable
Fitch has affirmed Cinda HK's medium-term note (MTN) programme and guaranteed US dollar bonds at 'A'. The bonds are issued by
Cinda HK's ratings are assessed under Fitch's Parent and Subsidiary Linkage Rating Criteria on a top-down basis and equalised with the rating on its parent,
Parent-Subsidiary Relationship
Full ownership means Cinda appoints Cinda HK's board of directors and senior management. Major decision-making is centralised at Cinda's headquarters and passed down to Cinda HK. The subsidiary is required to report its operating performance to the parent periodically and when necessary. Cinda HK's financials are consolidated into Cinda.
Relative Credit Quality
Fitch regards Cinda as a government-related entity whose IDRs are driven by expectation of government support when needed. Fitch uses the parent's support-driven IDRs in the parent-subsidiary linkage assessment, as we believe government support will extend to Cinda HK through Cinda. The subsidiary is an integral part of Cinda and its operations support Cinda's core business. Cinda's capital adequacy ratio was 18% at
Linkage Strength
'Medium' Legal Incentive to Support: Cinda provides a keepwell and equity-interest purchase undertaking agreement on the notes issued under the MTN programme before 2020 and certain bank borrowings, which commits Cinda to ensure Cinda HK has sufficient liquidity and remains solvent. The credit enhancement provided suggests Cinda has a legal incentive to extend the support to Cinda HK when needed, despite a weaker legal enforceability than a guarantee. Bonds, bank and other borrowings under the structure accounted for about 66% of the total at end-2021.
'High' Strategic Incentive to Support: Cinda HK is the main offshore subsidiary of Cinda, which relies on the subsidiary's access to international capital markets to facilitate the parent's distressed asset management business and broaden funding channels. In addition, Cinda HK's cross-border transactions are conducted together with other onshore related entities and are closely aligned with the parent's core business, underpinning its strategic importance.
The strong competitive advantage offered by Cinda HK has a higher influence in our strategic incentive assessment and offsets its moderate financial contribution in terms of assets, at about 39% of the group's consolidated total, and moderate growth potential.
'High' Operational Incentive to Support: Cinda and Cinda HK's operations are highly integrated as the parent controls Cinda HK's board and senior management. They also share common branding, and both entities share a customer base. It would be difficult to substitute Cinda HK, as Cinda would require regulatory approval to set up an overseas subsidiary, which would lead to high avoidance cost.
Operating Performance
Cinda HK's profit and assets are mostly from subsidiary
Derivation Summary
Cinda HK's ratings are assessed under Fitch's Parent and Subsidiary Linkage Rating Criteria on a top-down basis and equalised with the rating on its parent, Cinda, under a strong parent, weak subsidiary approach.
Issuer Profile
Cinda HK is a wholly owned subsidiary of Cinda. It is the major offshore funding, operating and investment-holding arm of its parent. Cinda is one of the five big asset management companies established by the Chinese government to mitigate financial risks, preserve state-owned assets, and promote the reform and development of
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Significant weakening of Cinda's legal, strategic or operational incentives to support Cinda HK, including lower competitive advantage for the parent, smaller share of common management and brand overlap, or lower avoidance cost for the parent, could lead to a wider rating gap between Cinda HK and its parent;
Dilution of the parent's shareholding could lead to a reassessment of the parent-subsidiary relationship;
Negative rating action on Cinda could lead to a downgrade of Cinda HK, as their ratings are credit-linked.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action on Cinda could lead to changes in the ratings of Cinda HK, as the subsidiary's ratings are equalised with that of Cinda.
ESG Considerations
Fitch is no longer providing ESG relevance scores for
Public Ratings with Credit Linkage to other ratings
Cinda HK's IDRs are directly linked to Cinda's IDRs, and Cinda's IDRs are linked to
Best/Worst Case Rating Scenario
International scale credit ratings of Sovereigns, Public Finance and Infrastructure 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 three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
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