Moody’s ups China Three Gorges to Aa3

Moody's Investors Service said it upgraded China Three Gorges Corp.’s (CTG) issuer rating to Aa3 from A1.

The outlook is stable.

The upgrade reflects the removal of notching for structural subordination.

Moody’s said the Aa3 rating incorporates a five-notch uplift based on the expected very high level of support from the Chinese government (Aa3, stable), under Moody's joint default analysis approach for government-related issuers.

"The five notch rating uplift reflects our expectation of very high support from the Chinese central government," Moody's vice president and senior analyst Ada Li said in a news release. "As such, we expect the central government to step in if the company encounters financial difficulties."

"Notwithstanding the presence of priority debt at the operating subsidiary level, we have removed notching, due to our expectation that in a financially distressed situation, support from the government would be likely provided to CTG as the holding company, thereby improving the position of its creditors over operating company creditors," Li added in the release.

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