Beijing Infrastructure Investment's ABO Agreement May Become A Model For Many Debt-Burdened Local Governments In China

HONG KONG (Standard&Poor's) April 27, 2016--Standard&Poor's Ratings Services believes a recent authorize, build and operate (ABO) agreement between the Beijing municipal government and Beijing Infrastructure Investment Co. Ltd. (BII) could become the model to follow for many of China's local governments with strong motivation to curb debt levels. For BII, the agreement is likely to have neutral implications for the ratings on the company (A+/Stable/--; cnAAA/--). "We don't believe the ABO agreement will change our assessment of the likelihood of extraordinary government support for BII, if needed, over the next two to three years at least," said Standard&Poor's credit analyst Joseph Lin. "But we do expect BII to gradually deleverage, and its service fees

...HONG KONG (Standard & Poor's) April 27, 2016--Standard & Poor's Ratings Services believes a recent authorize, build and operate (ABO) agreement between the Beijing municipal government and Beijing Infrastructure Investment Co. Ltd. (BII) could become the model to follow for many of China's local governments with strong motivation to curb debt levels. For BII, the agreement is likely to have neutral implications for the ratings on the company (A+/Stable/--; cnAAA/--). "We don't believe the ABO agreement will change our assessment of the likelihood of extraordinary government support for BII, if needed, over the next two to three years at least," said Standard & Poor's credit analyst Joseph Lin. "But we do expect BII to gradually deleverage, and its service fees are likely to increase operating cash flows, which could improve the company's financial risk profile." The ABO agreement partly reflects the impact of the national policy (Circular 43) that requires the freezing of government debt...

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