S&P rates Gansu Highway notes BBB

S&P said it assigned its BBB long-term issue rating to the dollar-denominated senior unsecured notes that Gansu Provincial Highway Aviation Tourism Investment Group Co. Ltd. plans to issue.

“We equalize the issue rating on the notes with the issuer credit rating on Gansu Highway because we believe the company's senior unsecured debtholders will not necessarily be disadvantaged relative to secured debtholders in the event of a default,” the agency said in a press release.

S&P noted Gansu’s ratio of secured debt to total debt exceeds its notching-down threshold of 50%. Gansu Highway had RMB 242.5 billion of secured debt as of Dec. 31, comprised mostly of loans from state-owned banks. The collateral is the concession rights over government toll roads in the province.

“Our issue rating also reflects our view that Gansu Highway's senior unsecured debt will benefit from government intervention if the company faces financial distress. This is because the company currently operates all the highways and more than 90% of government toll roads in Gansu province. Toll revenues and expenses on such toll roads are an integral part of the provincial government's fiscal budget. The government is heavily involved in day-to-day toll revenue collection and apportionment. We also consider Gansu Highway's secured loans as the government's off-budget debt,” S&P said.

Gansu intends to use the proceeds to refinance debt.

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