Moody's rates Bao-Trans bonds Baa1

Moody's Investors Service said it assigned a Baa1 senior unsecured rating to the proposed dollar-denominated bonds to be issued by Bao-Trans Enterprises Ltd.

The outlook is stable.

The bonds will be supported by Bao-Trans' immediate parent, Baoshan Iron & Steel Co. Ltd. (BISC, A3 stable), through a keepwell deed and a liquidity support covenants deed, executed between BISC, Bao-Trans and the bond trustee.

Moody's said the rating reflects the availability of strong parental support, due to the close linkage between BISC and Bao-Trans, and the integrated role Bao-Trans plays in BISC. Moody's sees strong reputational, financial, and operational incentives for BISC and its ultimate parent, Baosteel Group Corp. (A3 stable), to support Bao-Trans, if necessary.

It also reflects that Bao-Trans sources 70% of the iron ore required by BISC's steel production operation. It also secures important offshore low-cost trade financing, which accounted for 18% of BISC's gross debt at end-2012. As one of the largest and most profitable steelmakers in China, BISC relies on high quality iron ore imports and competitive financing costs. Hence, Bao-Trans performs an important function for its parent as well as the group, Moody's said.

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