MING YANG SMART ENERGY GROUP LIMITED
Fitch Ratings has affirmed
The notes were issued by MYSE's fully owned subsidiary,
The bond proceeds are being used for project construction and procurement related to the Tongliao Kailu 600MW wind power project, in line with the company's green finance framework.
Key Rating Drivers
BOC's Standby Letter of Credit: The rating on the bonds reflects the credit enhancement through a standby letter of credit (SBLC) that is provided to investors by
BOC Obligated if Issuer Defaults: Investors hold the benefit of BOC's irrevocable SBLC denominated in US dollars that will expire 30 days after the maturity of the bonds. The SBLC amount includes any amount that the issuer has failed to pay into the prefunding account when required to do so before any payment dates, including at the maturity of the bonds.
All payments are required to be deposited in the prefunding account at least 10 business days before the relevant payment date and if there is a pre-funding failure, the trustee will demand that the relevant amounts to be deposited by BOC on the mandatory redemption date. In the event of a default by the issuer, BOC would be obligated to the investors for the outstanding principal and interest payable.
Derivation Summary
MYSE's bond rating is based on BOC's Long-Term IDR. The issuer's bond is fully supported by the irrevocable US dollar-denominated SBLC.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The rating on the credit-enhanced bonds is based solely on BOC's commitment to meet its obligations under the SBLC to investors. Therefore, any positive action on BOC's ratings will result in an equivalent change in the rating of the bond.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Negative rating action on BOC would lead to negative action on the bond rating.
For BOC's ratings, the following sensitivities were outlined by Fitch in its rating action commentary dated
Factors that could, individually or collectively, lead to negative rating action/downgrade:
IDRS and GSR
The bank's IDR and GSR will come under pressure if Fitch perceives that the central government's propensity or ability to provide timely extraordinary support to the bank has diminished. Lower propensity may be through an enhanced resolution framework and diminished ability, potentially highlighted by a sovereign rating downgrade. However, we do not expect either scenario to occur in the near term.
BOC's Short-Term IDR will be downgraded if the sovereign's Short-Term IDR is downgraded and/or if BOC's Long-Term IDR is downgraded.
VR
A weaker operating environment (OE) or more extensive use of directed policy lending, resulting in a further meaningful build-up in credit risk without a corresponding increase in loss-absorption buffers, could be negative for BOC's Viability Rating (VR). A delay in the economic recovery globally could also affect BOC more than the other state banks due to its larger international presence.
In addition, a sustained deterioration in the bank's financial metrics could lead to a VR downgrade, including a combination of the following reported core metrics:
the four-year average of the operating profit/RWA ratio is likely to be sustained below 1.5%; and
the CET1 ratio falling below 11% without a credible plan to increase it back above this level.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
IDRS and GSR
An upgrade of the sovereign ratings could lead to positive rating action on BOC's GSR and its support-driven IDRs, if that were to indicate greater ability to support the bank with no change in support propensity. There is no upside for BOC's Short-Term IDR, as it is already at the highest level on the scale.
VR
Further upward revision in the OE assessment is a prerequisite for a VR upgrade and would need to be in conjunction with a sustained reduction in the bank's risk appetite and a substantial and sustained improvement in financial metrics. We believe this is unlikely in the near term.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate 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 four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Issuer Profile
MYSE is a leading wind turbine manufacturer in
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 rating of the US dollar senior unsecured notes issued by
A change in Fitch's assessment of BOC's Long-Term IDR would automatically result in a change in the rating on the credit-enhanced notes. In addition, any change in Fitch's view on the SBLC may result in a downgrade to the notes.
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