Fitch affirms Chalco

Fitch Ratings said it affirmed Aluminum Corporation of China Ltd.'s (Chalco) long-term foreign-currency issuer default rating at BBB+ with stable outlook and long-term local-currency issuer default rating at A- with negative outlook.

The short-term foreign and local-currency issuer default ratings were affirmed at F2.

Chalco is rated at three notches below China's ratings (A+/stable; local currency AA-/negative). This reflects Chalco and its parent Aluminium Corp. of China's (Chinalco) strategic importance to the government in developing the Chinese base metal industry and overseas resources, according to the agency.

Base metals like aluminium are important to China's development of its aerospace and defense industries. Chalco and Chinalco, the latter of which is a major producer in copper and other rare metals, are the largest metal group owned by the state-owned Assets Supervision and Administration Commission of the State Council, the agency noted.

Chalco's financial leverage, as measured by net adjusted debt/EBITDAR, was weak at 8.1x in 2011, while that for Chinalco was even weaker at 13.5x for the nine months ended September 2011. However, Chalco's interest coverage ratio of 2.1x reflects its continued ability to service its debt and its implied interest cost of funds of 4.5% in 2011 remains lower than China's base lending rate, the agency said.

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