Guangzhou AMC Awarded Investment Grade Rating by Well-known International Credit Rating Agency Fitch Ratings
Release Date:2020-02-21 15:53:25

On February 17, 2020, Fitch International Credit Ratings Co., Ltd. (hereinafter referred to as "Fitch"), a well-known international rating agency, awarded Guangzhou Asset Management Co., Ltd. (hereinafter referred to as "Guangzhou AMC") a long-term foreign and local currencies issuer default rating of 'BBB" with stable outlook. This is the second investment grade rating from well-known international rating agencies after Guangzhou AMC was awarded the investment grade from Moody's Ratings on January 17, 2020, reflecting the full recognition of the company by international mainstream rating agencies, the recognition of the background of the company's shareholders, capital strength, business development, profitability and compliance risk control. It has further enhanced the company's visibility and influence in the international capital market, creating favorable conditions for Guangzhou AMC to expand overseas financing channels and reduce domestic and foreign financing costs.

According to Fitch's report, Guangzhou AMC was established in April 2017,is the second local asset management company in Guangdong Province approved by the China Banking and Insurance Regulatory Commission (CBIRC), and is responsible for the bulk acquisition and disposal of non-performing financial assets. Most of the total revenue of Guangzhou AMC comes from the disposal and restructuring of non-performing assets.

Guangzhou Yuexiu Financial Holdings Group Company Limited (Yuexiu Financial Holding), a holding subsidiary of Guangzhou Yuexiu Holdings Limited (Yuexiu Group), holds 64.9% of Guangzhou AMC shares. Other major shareholders include Guangdong Hengjian Investment Holdings Co., Ltd. which is wholly owned by Guangdong provincial government and Guangdong Technology Financial Group Co., Ltd. They respectively hold 20% and 13.73% shares of Guangzhou AMC. Yuexiu Group is one of the largest state-owned enterprises in Guangzhou calculated by total assets. Guangzhou AMC is an important subsidiary of Yuexiu Group's financial services sector.

In terms of legal relevance, there is no guarantee and debt instrument trigger mechanism between Guangzhou AMC and Yuexiu Group, thus offsetting the benefits brought by the non-financing restriction and liquidity support mechanism between the two, with a moderate legal correlation.

Fitch said that Guangzhou AMC is the only non-performing asset management platform under Yuexiu Group. According to Yuexiu Group's strategic planning, non-performing asset management is the core business of the group's financial services sector, with strong operational and strategic relevance. Guangzhou AMC takes on the important mission of resolving financial risks in Guangdong Province, is familiar with the local market, occupies a large share in the non-performing asset disposal market in Guangdong Province, and plays an important role in the Yuxiu Group's ability to improve the competitiveness of the financial services sector. Yuexiu Group and Yuexiu Financial Holdings also provide tangible support for Guangzhou AMC, including capital injections, shareholder loans and liquidity support mechanisms. As a result, the operational correlation between the two is strong.

In view of the strong parent-subsidiary correlation between Guangzhou AMC and Yuexiu Group, the relatively weak credit quality of the subsidiary, and the strong operational and strategic correlation between the two, Fitch assessed the overall correlation between Guangzhou AMC and Yuexiu Group as strong.

In terms of the credit status of Yuexiu Group and Guangzhou AMC, any change in Fitch's internal evaluation of Yuexiu Group will result in a change in the rating of Guangzhou AMC. If the credit quality of Guangzhou AMC is significantly improved to a level comparable to that of Yuexiu Group, the rating for Guangzhou AMC may be increased.