OREANDA-NEWS. Fitch Ratings has assigned ZHIYUAN Group (BVI) Co., Ltd.'s USD200m 6.2% senior unsecured notes due 2019 a final rating of 'BB+'.

The assignment of the final ratings follows the receipt of documents conforming to information already received. The final ratings are in line with the expected ratings assigned on 3 January 2015.

The notes issued by ZHIYUAN Group (BVI) Co., Ltd are unconditionally and irrevocably guaranteed by HK Zhiyuan Group Limited (HKZY), a wholly owned subsidiary of Jiangsu NewHeadLine Development Group Co., Ltd. (Jiangsu NHL, BB+/Stable). The notes will be senior unsecured obligations of HKZY and rank pari passu with all other obligations of HKZY. The proceeds will be used primarily onshore to fund the Jiangsu NHL's city infrastructure development projects, refinance the indebtedness of the Jiangsu NHL, replenish working capital and for general corporate purpose.

KEY RATING DRIVERS

In place of a guarantee, Jiangsu NHL has granted a keepwell and liquidity support deed and a deed of equity interest purchase undertaking to ensure that HKZY has sufficient assets and liquidity to meet its obligations under the guarantee for the notes.

The notes are rated at the same level as Jiangsu NHL's Issuer Default Rating, given the strong link between Jiangsu NHL and HKZY and because the keepwell and liquidity support deed and deed of equity interest purchase undertaking transfer the ultimate responsibility of payment to Jiangsu NHL.

In Fitch's opinion, both the keepwell and liquidity support deed and the deed of equity interest purchase undertaking signal a strong intention from Jiangsu NHL to ensure that HKZY has sufficient funds to honour the debt obligations. The agency also believes Jiangsu NHL intends to maintain its reputation and credit profile in the international offshore market, and is unlikely to default on its offshore obligations. Additionally, a default by HKZY could have significant negative repercussions on Jiangsu NHL for any future offshore funding.

The ratings of Jiangsu NHL are credit linked to Lianyungang Municipality, which is located in China's north-eastern Jiangsu Province. This is reflected in the 100% state ownership of Jiangsu NHL, strong municipal oversight of its financials, and strategic importance of the entity's operation to the municipality.

RATING SENSIVITIES

Any rating action on Jiangsu NHL will result in a similar rating action on the rated bond issued by HKZY.

An upgrade of Fitch's credit view on Lianyungang Municipality, as well as a stronger and/or more explicit support commitment from the municipality, may trigger positive rating action on Jiangsu NHL.

Significant weakening of Jiangsu NHL's strategic importance to the municipality, dilution of the municipality's shareholding to below 75%, and/or reduced explicit and implicit municipality support, may result in a downgrade. A downgrade could also result from a weaker fiscal performance or increased indebtedness of the municipality, leading to deterioration in the sponsor's internally assessed creditworthiness and, as a result, of Jiangsu NHL's ratings.