Fitch: Yunnan Provincial Investment notes BBB+

Fitch Ratings said it assigned a final rating of BBB+ to Yunnan Provincial Investment Holdings Group’s $300 million 3 3/8% senior unsecured notes due 2019.

The final ratings are in line with the expected ratings assigned March 17, Fitch said.

The notes were issued directly by Yunnan Provincial, the agency said.

They will be senior unsecured obligations and rank pari passu with all other obligations of the province, which will use the proceeds as working capital and for general corporate purposes, Fitch said.

The ratings are credit linked to the province as reflected in its 100% state ownership, strong provincial oversight on its financial metrics and strategic importance of the company’s operation to the entire province, the agency said.

These factors result in a likelihood of extraordinary support from the provincial government, if needed, Fitch said.

Yunnan has a healthy budget, underpinned by strong central government support via China’s robust fiscal equalization system, where less developed regions receive government transfers sourced from more developed areas.

The strengths are partially mitigated by its moderate standalone fiscal strength before fiscal transfers from the central government, rapidly rising provincial government debt and relatively weak transparency, the agency said.

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