Sinochem Hong Kong (Group) Co. Ltd.

The stable outlook on Sinochem Hong Kong (Group) Co. Ltd. reflects our expectation that the company will remain a core subsidiary of Sinochem Group and benefit indirectly from extraordinary government support to the group. We anticipate that the group's credit metrics will be relatively stable in 2019-2020 as the robust performance of the real estate segment will be offset by the group's increased capital spending. We could lower the rating if:(1) Sinochem Group's financial performance deteriorates or the group pursues large-scale acquisitions or construction of new projects and primarily funds these with debt, such that its funds from operations (FFO) cash interest coverage falls below 2.5x over a prolonged period; or (2) in an unlikely case, we assess the likelihood

...Sinochem Hong Kong's credit quality is supported by its status as a core subsidiary of Sinochem Group. We believe Sinochem Group's business and financial risks are mirrored in the credit quality of Sinochem Hong Kong because the subsidiary is integral to the Group strategically, operationally, and financially. As the Group's sole offshore platform for investments and offshore funding, Sinochem Hong Kong will likely receive necessary support from Sinochem Group to meet its debt obligations. Sinochem Group has a very high likelihood of receiving extraordinary support from the Chinese government.The group is one of the two chemical entities owned by the central government in China and continues to execute strategic functions for the government. We believe that extraordinary government support for the parent is likely to flow to Sinochem Hong Kong in case the company comes under financial distress. In our view, Sinochem Group will maintain its current focus in five business areas: energy, chemicals,...

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