Fitch Places Baosteel Resources' 'BBB+' Ratings on Rating Watch Evolving
Please see Fitch Places Baosteel's 'A-' Rating on Rating Watch Evolving Following Announced Restructure, published 28 June 2016.
Fitch has also placed on RWE the 'A-' rating on the USD500m 3.875% senior unsecured notes, due 2020, issued by BRI's wholly owned subsidiary, Baosteel Financing 2015 Pty Ltd. The notes are unconditionally and irrevocably guaranteed by BRI and are rated at the same level as Baosteel Group. This is because Baosteel Group has granted an investment and keepwell deed and a liquidity-support covenant deed to ensure the issuer and BRI have sufficient assets and liquidity to meet their respective obligations for the notes.
KEY RATING DRIVERS
The RWE follows Fitch's rating action of placing Baosteel Group on RWE, reflecting uncertainty over the outcome of Fitch's reassessment of Baosteel Group's announced restructuring with Wuhan Iron and Steel Group (WISCO) on 26 June 2016.
BRI is rated one level below its 100%-owner, Baosteel Group, due to its strong linkages to the parent arising from its unique position as the group's only offshore resource development platform, overseas resources trading platform and offshore financing vehicle. Baosteel Group is rated one notch above its standalone rating of 'BBB+' to reflect potential state support due to its strategic importance to China as the largest and most profitable steel company that drives development of the country's steel industry.
RATING SENSITIVITIES
The RWE will be resolved upon completion of our review of the restructured group. We will downgrade the ratings if we conclude Baosteel Group's standalone rating will weaken and the linkage between Baosteel Group and China's State-owned Assets Supervision and Administration Commission (SASAC) is not enhanced,. Fitch may upgrade BRI's rating if we deem Baosteel Group's standalone rating as remaining unchanged and that the linkage between Baosteel Group and SASAC has strengthened.
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