OREANDA-NEWS.  Fitch Ratings has assigned China International Capital Corporation (Hong Kong) Limited's (CICCHK; BBB+/Stable) proposed USD2bn medium-term note (MTN) programme an expected rating of 'BBB+(EXP)'. At the same time, Fitch has assigned the proposed long-term notes issued under this MTN programme an expected rating of 'BBB+(EXP)'.

The notes are to be issued by CICC Hong Kong Finance 2016 MTN Limited (CICC Hong Kong Finance), and unconditionally and irrevocably guaranteed by CICCHK, which established CICC Hong Kong Finance as an offshore special purpose vehicle (SPV). In place of a guarantee, China International Capital Corporation Limited (CICC; BBB+/Stable) has provided a keepwell deed to ensure that CICCHK and CICC Hong Kong Finance have sufficient liquidity to meet their respective obligations for the notes. The issuance amount is within Fitch's expectation of CICC's leverage outlook when we rated it in April 2016.

CICCHK plans to use the proceeds of the note issue for working capital and general corporate purposes. The issuance amount and maturity structure will be finalised upon settlement. The final rating is contingent upon the receipt of final documents conforming to the information already received.

CICCHK is the sole offshore investment banking arm of CICC. It is wholly owned by CICC, highly integrated into the latter's operations and is a core subsidiary. It is also the primary overseas platform of CICC for investment and offshore financing and handles all of CICC's cross-border investment banking business, which is integral to CICC's strategic focus in expanding its international franchise. CICCHK represented 23.4% of CICC's total assets and accounted for 18.5% of CICC's total revenue in 2015.

KEY RATING DRIVERS

The ratings on the senior notes under the MTN programme primarily reflect our assessment of an extremely high probability of support from CICC to both CICCHK and CICC Hong Kong Finance. In Fitch's opinion, a default by the guarantor or issuer would create huge reputational risk for CICC and damage its franchise.

The guaranteed notes constitute direct, unsubordinated, unconditional, and unsecured obligations of CICC Hong Kong Finance and will rank pari passu with all of its other existing and future unsubordinated and unsecured obligations. With the keepwell deed, CICC intends to ensure CICCHK and CICC Hong Kong Finance to meet their obligations under the guaranteed notes, and remain solvent and a going concern at all times.

There could be practical difficulties in enforcing the keepwell deed, which is not as strong as a guarantee. Nevertheless, the agreement at the parent level suggests a very strong propensity for CICC to support the guarantor and issuer, if required.

RATING SENSITIVITIES

The MTN programme's ratings would be directly correlated to notable changes in the willingness or ability of CICC to support the guarantor or issuer.