Fitch Ratings has upgraded
Fitch has also upgraded to 'A-' from 'BBB+' a tranche from the medium-term note programme with a keepwell and equity interest purchase undertaking from
The upgrade follows the reassessment under the updated Parent and Subsidiary Linkage (PSL) Rating Criteria, published on
CSFG, listed on the
Key Rating Drivers
Major Acquisition: The rating actions come after CSFG's announcement in
The acquisition is a part of CSFG's strategy transformation from financial investment platform to industrial investment platform. CSFG's business profile and financials will be significantly different from the current position. The RWE reflects our view that the CSFG's rating could be upgraded or downgraded, depending on the outcome and our assessment of CSFG's linkage with SHS, which is assessed under our PSL criteria.
Parental Support Drives Ratings: Fitch believes SHS has a 'Medium' legal incentive, ' Medium' strategic incentive and 'Medium' operational incentive to support CSFG. Under our PSL criteria, these assessments lead to one notch down from of CSFG's rating from SHS.
Parent-Subsidiary Linkage: SHS indirectly held CSFG via two other offshore subsidiaries -
Medium Legal Incentive: SHS has guaranteed, on average, slightly more than 50% of CSFG's total debt in past three years, rising to 65% as of
Medium Strategic Incentive: SHS positions CSFG as a first-tier subsidiary and a key offshore financial investment platform. The company is involved in the parent's offshore business strategy. The acquisition of BECE means CSFG is transforming to the key industrial investment platform with renewable energy industry as the major investment direction. The acquisition is approved by SHS and the
We expect a moderate growth potential of CSFG's future business, taking into consideration the early stage of transformation and further detailed operating integration has yet to be established. The moderate competitive advantage and growth potential mitigate the assessment of low financial contribution. The assessment of the strategic incentive may change depending on the future development and performance of its business, given strategy transformation is ongoing.
Medium Operational Incentive: We assess both operational synergies incentive and management and brand incentive as 'Medium'. For the latter, the chairman of CSFG also act as SHS's executive director. Key operations and financing decisions need to be approved by SHS. CSFG operates under the name of
RATING SENSITIVITIES
The RWE could be resolved upon review of the issuer's finances and other information enabling Fitch to assess the direction of the linkages with the parent company SHS.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Stronger legal, strategic and operational incentives for SHS to support CSFG could narrow the rating gap between CSFG and SHS;
Positive rating action on SHS;
Any positive change in CSFG's IDR would lead to similar rating action on the tranche from the medium-term note programme guaranteed by CSFG.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Weakening of SHS's legal strategic and operational incentives to support CSFG, including lower competitive advantage and growth potential to the parent or less common management and operation integration;
Dilution in the parent's shareholding;
Negative rating action on SHS;
Any negative change in CSFG's IDRs would lead to similar rating action on the tranche from the medium-term note programme guaranteed by CSFG.
Best/Worst Case Rating Scenario
International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Debt Structure: Total debt was
Issuer Profile
CSFG is a first-tier subsidiary and a key offshore financial investment platform of SHS. Financial assets were over 50% of the total assets as of end-2021, and made up of listed and unlisted debt and equity investments, followed by loan receivables (16%) and finance lease receivables (4%). Net assets were about
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 ratings of CSFG are linked to those of SHS.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This 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. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONS
Entity / Debt
Rating
Prior
senior unsecured
LT
A-
Upgrade
BBB+
LT IDR
A-
Upgrade
BBB+
LC LT IDR
A-
Upgrade
BBB+
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