Fitch rates Chalco notes BBB

Fitch Ratings said it assigned an expected BBB rating to Aluminum Corp. of China Ltd.’s (Chalco) proposed dollar-denominated senior perpetual capital securities.

The securities will be guaranteed by its wholly owned subsidiary, Chalco Hongkong Ltd. and issued by wholly owned subsidiary Chalco Hong Kong Investment Co. Ltd.

In place of a guarantee, Chalco has granted a keepwell deed and a deed of equity interest purchase undertaking to ensure that the guarantor, Chalco Hongkong, has sufficient assets and liquidity to meet its obligations under the guarantee for the senior perpetual securities, Fitch said.

The agency said it expects to accord no equity credit to the proposed securities in its evaluation of Chalco's capital structure and leverage as this instrument ranks pari passu with Chalco's senior unsecured obligations.

The proposed perpetual securities are rated one notch below Chalco's BBB+ issuer default rating, Fitch said.

This one-notch difference reflects the proposed securities' coupon deferral feature, the agency explained.

Chalco is rated three notches below China's sovereign rating based the company’s strategic importance to the government in developing the Chinese base metal industry and in securing overseas resources, Fitch said.

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