Fitch Affirms Tianjin Free Trade Zone Investment at ‘BBB+’/Stable


HONG KONG, November 23 – Fitch Ratings has affirmed Tianjin Free Trade Zone Investment Holding Group Co., Ltd.’s (Tianjin FTZIH) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB+’ with a Stable Outlook.

A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS Links to Tianjin Municipality: Tianjin FTZIH’s ratings are credit-linked to Fitch’s internal assessment of China’s Tianjin Municipality, the company’s sponsor.

The municipality fully owns Tianjin FTZIH, has strong oversight of the company’s financial performance, and the company is of strategic importance to the municipality. These factors result in a strong likelihood of extraordinary support from the municipality to the company, if needed.

Therefore, Tianjin FTZIH is classified as a credit-linked public-sector entity under Fitch’s criteria. Tianjin’s Strong Creditworthiness: Tianjin municipality has a satisfactory budget performance, diversified socio-economic profile and strategic importance as one of the two core cities in the Bohai Rim Economic Zone in northern China.

Tianjin’s tax base is derived from a relatively diversified economy. Strategic Importance Assessed at Stronger: Tianjin FTZIH is an integrated body of Tianjin Municipality’s flagship economic development zone – Tianjin Port Free Trade Zone (Tianjin Port FTZ) – and plays an important role in implementing the Tianjin government and Tianjin Port Free Trade Zone Administration Committee’s (Tianjin FTZAC) blueprint for Tianjin Port FTZ.


Tianjin FTZIH is the sole entity developing large-scale urban infrastructure projects, providing utilities services, and inviting investment and forming joint ventures with outside parties on the government’s behalf. In 2016, Tianjin FTZIH declared CNY1,680 million in dividends to its shareholders, or 18% of its revenue.

Legal Status Assessed at Mid-Range: Tianjin FTZIH is registered as a state-owned limited liability company under Chinese company law, yet it is subject to bankruptcy procedure.

It is wholly owned by Tianjin FTZAC and is directly under the supervision and control of Tianjin State-owned Assets Supervision and Administration Commission and supervised by the Tianjin government. Control Attribute Assessed at Stronger: The company’s board members are mainly appointed by the Tianjin municipal government and its major projects need the municipal government’s approval.

The company’s financing plan and debt level are also closely monitored by the municipality. Tianjin FTZIH is required to report its operational and financial results on a regular basis to the Tianjin municipal government and Tianjin FTZAC.

Integration Attribute Assessed at Stronger: Tianjin FTZAC provides funding to the company through subsidies or capital injections to ease the company’s debt servicing pressure, enhance its financial flexibility and support its capex.

Fitch expects revenue from the public sector to continue to account for about 25% of income and capital subsidies to be provided to Tianjin FTZIH, alongside past year contributions, to complement internal sources and borrowing.

Moderate Financial Profile: Tianjin FTZIH’s financial profile has been characterised by sizeable capital expenditure and high leverage in the past three years. Fitch believes this trend will continue in the medium term, driven by the ongoing infrastructure improvement in Tianjin Port FTZ. RATING SENSITIVITIES An upgrade of Fitch’s internal credit assessment of Tianjin Municipality as well as a stronger and/or more explicit support commitment from the municipality may trigger a positive rating action on Tianjin FTZIH.

Significant weakening of Tianjin FTZIH’s strategic importance to the municipality, dilution of the government’s shareholding, and/or weaker linkage with Tianjin Municipality, may result in a downgrade. A downgrade could also stem from a weaker fiscal performance or increased indebtedness of the municipality, leading to deterioration in the sponsor’s internally assessed creditworthiness.

The full list of rating actions is as follows: Tianjin Free Trade Zone Investment Holding Group Co., Ltd.

Long-Term Foreign-Currency IDR affirmed at ‘BBB+’; Outlook Stable Long-Term Local-Currency IDR affirmed at ‘BBB+’; Outlook Stable Hongkong Baorong Development Limited (Tianjin FTZIH’s wholly owned offshore subsidiary) USD500 million 3.625% senior unsecured notes due 2018 affirmed at ‘BBB+’ Contact: Primary Analyst Lorraine Liu Associate Director +852 2263 9929 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Terry Gao Senior Director +852 2263 9972 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria International Local and Regional Governments Rating Criteria – Outside the United States (pub. 18 Apr 2016) Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) Additional Disclosures Dodd-Frank Rating Information Disclosure Form Solicitation Status Endorsement Policy ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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