BEIJING，July 5, 2021 -- S&P Global (China) Ratings has affirmed its “AAAspc” issuer credit rating on Beijing State-Owned Capital Operation and Management Center (“BSCOMC”)，the outlook is stable.
BSCOMC was established in 2008 and is wholly owned by the State-owned Assets Supervision and Administration Commission of People’s Government of Beijing Municipality (Beijing SASAC). BSCOMC’s executive management committee (“Management Committee”) is made up of high-level officials from Beijing SASAC. Playing a strategic role on behalf of the Beijing municipal government, BSCOMC aims to promote the orderly allocation of state-owned capital and achieve capital appreciation of state-owned assets. BSCOMC has equity stakes in high-quality, competitive Beijing SOEs and is an important state-owned capital operation platform under Beijing SASAC.
In our view, the issuer credit rating of “AAAspc” reflects BSCOMC’s critical importance to Beijing municipal government and its substantial investment portfolio, which has good asset credit quality and good diversification across various industries and regions. We view BSCOMC’s financial risk profile as modest. BSCOMC has a low loan-to-value ratio, strong cash flow adequacy ratio and a good capital structure. We expect BSCOMC to maintain good access to refinancing in the future.
We view the indicative support capacity of Beijing municipal government as extremely strong, and regard BSCOMC as critical to its government. BSCOMC has very close ties with Beijing municipal government in terms of its equity structure and decision-making process, and we believe it plays a very important role on the government’s behalf. Major investment decisions require the Beijing municipal government’s approval. Since its establishment, BSCOMC has received ongoing support from Beijing municipal government via equity transfers, capital injections and other aspects. We do not anticipate any changes to the strategic role BSCOMC plays on behalf of the Beijing municipal government.
By the end of December 2020, BSCOMC had over RMB 3.1 trillion in assets under management, accounting for more than half of the assets under Beijing SASAC. On behalf of the Beijing municipal government, BSCOMC carries out its capital operations mainly through equity investments and fund investments.
In our opinion, BSCOMC’s investment portfolio has good indicative asset credit quality. BSCOMC has equity stakes in several high-quality SOEs in Beijing which are competitive players in their respective industries. We believe that the indicative credit quality of the main investee companies in the portfolio is relatively good and overall better than the national average.
BSCOMC’s portfolio is, in our view, well diversified. Its investee companies are spread across a wide range of industries and geographic regions. The portfolio covers more than 10 industries dispersed across upstream and downstream sectors. Major industries in the portfolio include: metals and mining downstream, unregulated power and gas, transportation infrastructure, Auto OEM, building materials, agribusiness and commodity foods, real estate developer, technology hardware and semiconductors, etc.A considerable portion of companies in the investment portfolio transitioned from regional Beijing-based SOEs to large-scale players with operations across the country, developing good reputations nationwide.
In our view, BSCOMC’s large investment portfolio and relatively light parent-level debt can help it maintain its LTV ratio at a relatively low level. We expect some of BSCOMC’s investments to be debt-funded, while its abundant cash reserves can also cover other investment demand. Overall debt is expected to rise slightly. In our view, BSCOMC will maintain its prudent financial policy and keep its LTV ratio at a low level in the coming year. We expect BSCOMC’s adjusted cash dividends and interest income to cover its interest and daily operating expenses, with cash adequacy ratio at a sufficient level.
The stable outlook on BSCOMC reflects our view that BSCOMC is critical to the Beijing municipal government, and that the indicative support capacity of Beijing municipal government remains extremely strong. As Beijing’s primary state-owned capital operation platform, we do not expect the strategic role BSCOMC plays on behalf of Beijing municipal government to change, wherein it promotes the orderly allocation of state-owned capital and achieves capital appreciation of state-owned assets. The scale of BSCOMC’s investment portfolio is expected to remain stable and asset credit quality is set to maintain a good level, with BSCOMC’s investments widely distributed across various industries. We expect BSCOMC to continue adhering to its prudent financial policy while maintaining a low LTV ratio.
Downside scenario:
In our opinion, the likelihood of BSCOMC’s issuer credit rating being downgraded is very low. However, we might consider lowering the rating of BSCOMC in the following circumstances:
1) BSCOMC’s role and status change significantly, weakening its importance to the Beijing municipal government. This scenario could occur if i) the ownership structure changes, and Beijing SASAC no longer has direct control over BSCOMC; ii) the management and decision-making process changes significantly, weakening the control of Beijing government over the appointment of BSCOMC’s Management Committee and limiting their control over its investment decisions; iii) a significant proportion of BSCOMC’s assets are transferred out of its portfolio, significantly impacting its role in managing state-owned assets.
2) Beijing's indicative support capacity weakens significantly.
Upside scenario: not applicable
Related Methodologies:
S&P Global (China) Ratings-Corporate Methodology, July 28, 2020
S&P Global (China) Ratings General Considerations on Rating Modifiers and Relative Ranking, May 21, 2019
Related Research:
Understanding S&P Global (China) Ratings Corporate Methodology, July 28, 2020
Commentary: Understanding S&P Global (China) Ratings General Considerations On Rating Modifiers and Relative Ranking Methodology, June 29, 2020
Commentary: Analyzing Investment Holding Companies’ Credit Quality With S&P Global (China) Ratings’ Corporate Methodology, March 1, 2021
Media Contacts:
Sharon.Tang，Beijing；(86)10-6569-2988；sharon.tang@spgchinaratings.cn
Analyst Contacts:
Huang Wang, Beijing; huang.wang@spgchinaratings.cn
Renyuan Zhang，Beijing; renyuan.zhang@spgchinaratings.cn
Yingxue Ren, Beijing; yingxue.ren@spgchinaratings.cn