Caixin
Jul 12, 2019 09:53 PM
FINANCE

S&P Global’s China Unit Issues Its First Rating on Onshore Bond

S&P Global (China) has given ICBC Financial Leasing, one of China’s biggest financial leasing firms, a “AAA” issuer credit rating. Photo: IC Photo
S&P Global (China) has given ICBC Financial Leasing, one of China’s biggest financial leasing firms, a “AAA” issuer credit rating. Photo: IC Photo

S&P Global (China) Ratings Co. Ltd., New York-listed S&P Global Ratings Inc.’s wholly-owned subsidiary that rates bonds on the Chinese mainland market, issued the first rating by an independent foreign firm for the onshore market. However, the rating was notable for how it differed with S&P Global’s past rating for the same company’s bonds offshore.

S&P Global (China) gave ICBC Financial Leasing Co. Ltd., one of China’s biggest financial leasing firms, a “AAA” issuer credit rating based on its stable outlook and its firm link to its parent, state-owned Industrial and Commercial Bank of China Ltd., which has an “extremely low credit risk,” the ratings agency said in a statement.

The “AAA” stood in contrast to the “A/A-1” issuer credit rating that S&P Global had given ICBC Financial in the offshore market in October 2014.

Foreign ratings agencies have for years evaluated the creditworthiness of the bonds that Chinese companies issue offshore. Since 1992, S&P Global has rated the offshore bonds of more than 400 Chinese issuers, according to the ratings agency. Yet until this year, if foreign rating agencies wanted to assess the quality of bonds on the onshore market, they had to do so through joint ventures with local firms. Fitch Ratings Inc. and Moody’s Corp., the other two major global ratings agencies, have cooperated with local partners to conduct such business.

In January, S&P Global (China) won approval to be the first foreign firm to do independent credit ratings on the mainland. However, questions emerged after it said that it adopted new rating methods and standards specially tailored for China’s onshore market.

The two methods for onshore and offshore ratings are based on different methodologies and so the ratings may be different, said Li Ying, director of financial institutions ratings at S&P Global (China). “We are likely to see some associations between the two rating systems in the future, but there won’t be direct mapping,” Li told Caixin on Thursday.

Within China, S&P’s ratings are going be relative to each other, Douglas Peterson, president and CEO of S&P Global, told Caixin earlier this year. The ratings agency believes that it will be a while before it has the experience to do mapping, which links an onshore rating with a global one).

“What China lacks most is credit ratings and analyses that are in line with international standards,” a Hong Kong-based bond market professional previously told Caixin, adding that if foreign ratings agencies tailor ratings for China, foreign investors will still have no point of reference.

Contact reporter Timmy Shen (hogmingshen@caixin.com, Twitter: @timmyhmshen)

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