Fitch Rates CICC International's USD MTN Programme Proposed Notes 'BBB+(EXP)'

Fitch Ratings has assigned an expected 'BBB+(EXP)' rating to China International Capital Corporation (International) Limited's (CICC International, BBB+/Stable) proposed long-term senior unsecured notes to be issued under the medium-term note (MTN) programme.

The MTN programme was first rated 'BBB+' by Fitch on 13 May 2016.

The proposed notes will be listed on the Hong Kong Stock Exchange and the proceeds will be used to refinance its existing debt and for working capital and general corporate purposes. The issue amount and maturity structure will be finalised upon settlement. The final rating is contingent upon the receipt of final documents conforming to the information already received by Fitch.

The proposed notes will be issued by CICC Hong Kong Finance 2016 MTN Limited (CICC Hong Kong 2016 MTN), and unconditionally and irrevocably guaranteed by CICC International, which set up CICC Hong Kong 2016 MTN as an offshore special purpose vehicle. China International Capital Corporation Limited (CICC, BBB+/Stable) has provided a keepwell deed in place of a guarantee, which shall cause CICC International and CICC Hong Kong 2016 MTN to have sufficient liquidity to meet their obligations for the proposed notes.

CICC International is the primary overseas investment holding platform of CICC, which conducts its overseas business, including its investment banking business, through the subsidiary. CICC International is wholly owned by CICC, highly integrated into the parent's operations and also a core subsidiary. It is CICC's main overseas platform for investment and offshore financing and handles all of CICC's cross-border investment banking business, which is integral to CICC's strategic focus in expanding its international franchise.

Key Rating Drivers

The expected rating on the proposed notes under the MTN programme mainly reflects our assessment of a high probability of support from CICC for both CICC International and CICC Hong Kong 2016 MTN. We believe a default by the guarantor or issuer would create a huge reputational risk for CICC and damage its franchise.

The proposed notes constitute direct, unsubordinated, unconditional, and unsecured obligations of CICC Hong Kong 2016 MTN and will rank at all times pari passu with all other unsubordinated and unsecured obligations. CICC's keepwell deed is intended to cause CICC International and CICC Hong Kong 2016 MTN to be able to meet their obligations under the proposed notes, and remain solvent and a going concern at all times.

There could be practical difficulties in enforcing the keepwell deed, which is not as strong as a guarantee. Nevertheless, the agreement at the parent level suggests a very strong propensity for CICC to support the guarantor and issuer, if needed.

CICC's Long-Term Issuer Default Rating (IDR), affirmed on 12 July 2023, is mainly driven by Fitch's expectations it will receive extraordinary support from major shareholder Central Huijin Investment Ltd., if needed. This is underpinned by CICC's assumed strategic role as an internationally influential Chinese investment bank and its strong linkage with Central Huijin, a wholly owned subsidiary of China Investment Corporation, the country's sovereign wealth fund.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A downgrade of CICC's Long-Term IDR is likely to affect the expected rating on the proposed notes under the MTN programme to the same extent. Any indication of a decline in CICC's propensity and/or ability to support the guarantor or issuer will also lead to negative rating action on the proposed notes.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

As the expected rating of the proposed notes is already equalised with that of CICC, a rating upgrade appears unlikely without a similar rating action on CICC.

Date of Relevant Committee

10 July 2023

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

The expected rating of the proposed notes is directly linked to the ratings of CICC International and CICC.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.