OREANDA-NEWS. Fitch Ratings has affirmed the 'A' rating on Rizhao Port (Hong Kong) Company Limited's (Rizhao Port) CNY850m 4.25% credit enhanced bonds denominated in offshore yuan and due 2017. Rizhao Port is wholly owned by Rizhao Port Group Co. Ltd. (Rizhao Group).

KEY RATING DRIVERS

Irrevocable Standby Letter of Credit: The rating reflects the credit enhancement that will be provided to investors by the Shandong Branch of Agricultural Bank of China Limited (ABC; A/Stable). The note is rated at the same level as ABC's Long-Term Issuer Default Rating (IDR) as ABC is bound by agreements made by its branches and thus the transaction is considered a senior unsecured obligation of ABC.

Investors will have the benefit of an irrevocable standby letter of credit (SBLC) denominated in Chinese yuan issued by ABC that will expire at 11:59 PM (Beijing Time) on the maturity date of the proposed bond. The SBLC amount includes any amount that the issuer has failed to pay into the prefunding account when required to do so before any payment dates, including at the maturity of the bonds. In the event of default by the issuer, ABC would be obligated to the investors for the outstanding principal and interest payable.

As part of the bond offering, Rizhao Group granted a keepwell deed, under which it will provide liquidity to the issuer when needed to ensure Rizhao Port remains solvent, functions as a going concern and is able to make timely payments on the notes.

RATING SENSITIVITIES

Since the rating of the credit enhanced bonds is based solely on ABC's commitment to meet its obligations under the SBLC to the investors, any change in Fitch's assessments of ABC's ratings will result in an equivalent change in the rating of this bond.