Moody’s Investors Service has upgraded China Merchants Holdings International (CMHI)’s issuer and senior unsecured debt ratings to Baa1 from Baa2, with the rating outlook stable.
“The upgrade of CMHI’s issuer and senior unsecured debt ratings is based on Moody’s expectation that the company will receive extraordinary financial support from its parent, China Merchants Group (CMG),” said Ada Li, Moody’s vice-president and senior analyst.
CMG is a conglomerate, wholly owned by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) of China. It was ranked 10th among the Chinese government’s state-owned enterprises by net profit in 2014. Its businesses include property development, finance, ports, shipping, toll roads, and logistics.
CMG is profitable and has strategic businesses that are likely to benefit from the Chinese government’s support. Accordingly, Moody’s expects CMG will have the capacity to provide extraordinary financial support to CMHI.
“The expected parental support is also based upon CMHI’s strategic importance within CMG,” said Li, who is also the lead analyst for CMHI.
CMHI, 54.2% owned by CMG, is strategically important to CMG as a listed flagship of the group’s transportation and infrastructure segment, which is a core business within CMG. It is also an important company to expand CMG’s business overseas.
To support CMHI’s business growth, CMG has provided financial and operational support. For example, CMG’s affiliate has underwritten CMHI’s mandatory convertible securities issued in June 2014, and CMG has provided financing to support CMHI’s overseas expansion in 2012 and 2013.