Fitch Ratings has assigned ICBCIL Finance Co. Limited's (A/Stable) proposed senior unsecured US dollar notes an expected 'A(EXP)' rating. The proposed notes will be issued under ICBCIL Finance's medium-term note (MTN) programme and benefit from a keepwell and liquidity support deed and deed of asset purchase undertaking provided by ICBC Financial Leasing Co., Ltd. (ICBC Leasing, A/Stable).
The proposed notes will be listed on Hong Kong Stock Exchange. The proceeds of the notes will be used to fund ordinary asset purchase activities, refinancing (including refinancing of eligible wind power projects under ICBC Leasing's green finance framework) and other general corporate purposes.
The maturity structure will be finalised upon settlement, and the final ratings are contingent upon the receipt of final documents conforming to information already received. The MTN programme was first rated on 7 October 2015 and most recently affirmed on 27 May 2021. The programme was upsized to US$20 billion in September 2019 from US$10 billion to support asset expansion.
The rating on the proposed notes reflects Fitch’s assessment of an extremely high probability of support from ICBC Leasing to ICBCIL Finance, which is the primary treasury platform for the ICBC Leasing's offshore leasing operations. ICBC Leasing is the wholly owned leasing arm of Industrial and Commercial Bank of China (ICBC, A/Stable) and provides aviation, shipping, and equipment leasing services. It was the largest lessor in China by total managed assets at end-2020.
Fitch factors in an extremely high level of support from ICBC Leasing to ICBCIL Finance, as the two are highly integrated. ICBCIL Finance is owned by ICBC and not by ICBC Leasing, but it is highly integrated into ICBC Leasing's operations. In addition, ICBC has authorised and mandated ICBC Leasing to exercise full managerial and operational control over ICBCIL Finance. A default on the notes or by ICBCIL Finance would create significant reputational risk for ICBC Leasing and ICBC, in Fitch's view, as counterparties generally see ICBCIL Finance as an integral part of ICBC Leasing.
The keepwell and liquidity support deed commits ICBC Leasing to ensure that the issuer maintains sufficient levels of equity and liquidity to service its obligations to offshore bondholders at all times. The deed of asset purchase undertaking serves as an important mechanism to allow ICBC Leasing to provide foreign-currency liquidity to ICBCIL Finance in a timely manner.
ICBC Leasing's rating reflects our view of an extremely high level of support from ICBC, given its role as the bank's core subsidiary. The China Banking and Insurance Regulatory Commission's regulations, as well as ICBC Leasing's articles of association, require ICBC to provide liquidity and capital support to ICBC Leasing, if needed.