OREANDA-NEWS. Fitch Ratings has assigned Sinochem Offshore Capital Company Limited's (Sinochem Offshore) CHF250m 0.76% senior unsecured Swiss franc notes due 2022, issued under Sinochem Hong Kong (Group) Company Limited's (Sinochem HK; A-/Stable) medium-term note (MTN) programme, a final rating of 'A-'.

Sinochem Offshore is a wholly owned subsidiary of Sinochem HK, which provides an unconditional and irrevocable guarantee for the MTN programme. The programme is rated at the same level as Sinochem HK's senior unsecured rating to reflect this guarantee.

This final rating follows the receipt of documents conforming to information already received and is in line with the expected rating assigned on 21 May 2015.

KEY RATING DRIVERS

Strong State Linkage: Sinochem HK's parent, Sinochem Group, has strong links to the Chinese state (A+/Stable) due to the importance of its agrochemical operations, especially in seeds. The group also exhibits strong state linkages in its rubber and other chemical operations. According to Sinochem Group, the proportion of its long-term assets in the strategic agrochemical and chemical sectors is 30%. This does not include its oil and gas assets, including its contribution to the country's strategic reserves, which account for more than 30% of the company's assets.

Role in Agricultural Modernisation: Sinochem Group's agrochemical operations are the only horizontally and vertically integrated ones in China, covering 95% of domestic arable land. Soil enrichment, farmers' skill development and education, and bio-tech R&D in agrochemicals are all essential tasks performed by Sinochem on a quasi-commercial basis in conjunction with the Ministry of Agriculture to achieve and maintain a certain level of self-sufficiency in food production.

Past Investments Yielding Results: Fitch expects Sinochem HK's credit metrics to improve in 2015 but this is sensitive to changes in global oil prices and the company's future investments. Sinochem HK's large investment in oil fields and property undertaken by its Hong Kong-listed subsidiary, Franshion Properties (China) Limited (Franshion; BBB-/Stable), are yielding results that support the improvement in Sinochem HK's credit metrics.

Group Leverage to Fall: Fitch expects Sinochem Group's leverage to fall in 2015 because capex growth will slow after the completion of the Quanzhou refinery in 2013 which will start contributing to earnings from 2015.

KEY ASSUMPTIONS

Fitch's key assumptions within our rating case for the issuer include:
- Brent oil price of USD55/barrel for 2015, USD65/barrel for 2016, and USD80/barrel thereafter; and
- Stable profitability in 2015-2017.

RATING SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to positive rating action include:
- Positive rating action on the Chinese sovereign; and
- Strengthening linkages between Sinochem Group and the Chinese sovereign.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- Negative rating action on the Chinese sovereign;
- Weakening linkages between Sinochem HK and Sinochem Group; and
- Weakening linkages between Sinochem Group and the Chinese sovereign.