Fitch rates China Grand Auto notes B+

Fitch Ratings said it assigned a BB- long-term foreign-currency issuer default rating of China Grand Automotive Services Co., Ltd., along with foreign-currency senior unsecured rating of BB-.

Fitch also assigned an expected B+ rating to Baoxin Auto Finance I Ltd.'s proposed dollar-denominated senior perpetual securities.

A stable outlook also was assigned.

Baoxin Finance is 100% owned by China Grand Auto's 75% owned subsidiary, Baoxin Auto Group Ltd. The securities will be unconditionally and irrevocably guaranteed by China Grand Auto.

Fitch said it expects to assign no equity credit to the proposed securities in its evaluation of China Grand Auto's capital structure and leverage because this instrument ranks pari passu with the company's senior unsecured obligations.

The proposed perpetual securities are rated one notch below China Grand Auto's BB- senior unsecured rating as part of the agency’s criteria for hybrid debt, Fitch added. This one-notch difference reflects the proposed securities' coupon deferral feature.

The company’s ratings are supported by its large operating scale and leading market position, the agency said.

China Grand Auto has been a consolidator in the market and the recent of acquisition of Baoxin Auto further expanded China Grand Auto's offerings in the luxury car segment, the agency said.

Fitch also said it expects passenger-vehicle sales to grow in the single-digit percentages over the medium-term, a pace that is healthy and higher than the developed market average.

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