Fitch Ratings-Taipei-19 March 2017: Fitch Ratings has assigned the notes issued under Bank of Communications Financial Leasing Co., Ltd.‘s (Bocom Leasing; A/Stable) medium-term note (MTN) programme a final rating of ’A’. The issued notes are:

- USD700million of 3% notes due on 21 March 2020
- USD1.05 billion of 3.5% notes due on 21 March 2022
— USD250million of 4.25% notes due on 21 March 2027

The issuer under the MTN programme will be Azure Nova International Finance Limited, an offshore special purpose vehicle wholly owned by Bocom Leasing. The MTN programme is unconditionally and irrevocably guaranteed by Bocom Leasing. Bocom Leasing ‘s USD5.5bn MTN programme was first rated ’A’ by Fitch on 27 October 2016 and was subsequently affirmed on 23 February 2017. The size of the programme was increased to USD5.5bn, from USD2bn in February 2017 to support the company’s growth.

The notes will be listed on the Hong Kong Stock Exchange and the proceeds will be used for general corporate purposes. The final rating is in line with the expected rating assigned on 6 March 2017 and follows the receipt of documents conforming to information previously received.

Bocom Leasing was established by Bank of Communications Co., Ltd. (Bocom; A/Stable) in 2007 as its wholly owned leasing subsidiary. Bocom Leasing is now the second-largest financial leasing company in China by managed assets, while Bocom is the country’s fifth-largest state-owned commercial bank.

KEY RATING DRIVERS

The rating on the notes issued under the MTN programme reflects Fitch’s assessment of an extremely high probability of support from Bocom Leasing to Azure Nova and are in line with Bocom Leasing’s Long-Term Issuer Default Rating (IDR) of ‘A’.

The senior notes issued under the MTN programme represent direct, general, unconditional and unsecured obligations of the issuer and of Bocom Leasing by virtue of the deed of guarantee given by Bocom Leasing to Azure Nova’s MTN programme. Such obligations rank pari passu with all other present and future unsecured obligations of Bocom Leasing.

Bocom Leasing’s IDR is in turn based on an extremely high probability of support, if required, from parent Bocom. Fitch considers Bocom Leasing to be a core subsidiary of Bocom due to its strategic importance to Bocom and high level of integration with the parent.

RATING SENSITIVITIES

Any changes to the rating on the notes issued under the programme will be directly correlated with changes in Bocom Leasing’s IDR, which will in turn reflect any shift in the propensity or ability of Bocom to support Bocom Leasing. In addition, the rating on the notes issued under the programme will be downgraded if there is a significant adverse change in China’s capital account regulation that results in restraints on Bocom Leasing providing timely cross-border support for the debt servicing of the notes.