Fitch Affirms Doosan Infracore's Capital Securities at 'A-'

HD Hyundai Infracore Co

11/07/2016 09:08

(The following statement was released by the rating agency)

HONG KONG/SHANGHAI, July 11 (Fitch) Fitch Ratings has affirmed Korea-based 
Doosan Infracore Co Ltd's (DI) USD500m capital securities at 'A-'.

The rating reflects the credit enhancement provided to investors by the banks 
offering the credit facility.

KEY RATING DRIVERS

Credit Enhancement by Banks: The rating reflects the credit enhancement provided 
to investors by Korea Development Bank (AA-/Stable), Woori Bank (A-/Stable) and 
KEB Hana Bank (A-/Stable). Investors have the right to put the securities to 
Core Partners Limited, a special-purpose company unrelated to DI. The banks 
provide a five-year irrevocable and unconditional commitment via a credit 
agreement to lend Core Partners Limited an amount sufficient to meet its put 
obligations. This amount includes the outstanding principal at the time and any 
accumulated distribution payments.

 

Put Option: Investors can exercise the put option if DI fails to redeem the 
securities at the end of the fifth year (2017), when the distribution rate steps 
up by 500bp. Investors also have the right to exercise the put option in some 
other instances prior to the fifth year, including the bankruptcy of DI.

Rating Reflects Banks' Commitment: Fitch takes the view that investors will 
exercise the put option at the end of the fifth year (2017) if DI does not 
redeem the securities. The rating reflects the banks' commitment to fund Core 
Partners Limited to meet its obligations to the investors as a result. However, 
the rating is capped at the lowest of Fitch's assessments of the banks due to 
the banks' several, but not joint, obligations under the credit agreement.

DI's Credit Not Considered: DI's standalone credit strength is not considered in 
rating the securities as the credit agreement remains in force even if DI is 
declared bankrupt. However, DI may elect to defer distribution payments during 
the credit agreement period without triggering the put option. Investors will 
receive any deferred distributions only upon the exercise of the put option.

RATING SENSITIVITIES

Fitch will downgrade the rating of the securities in similar magnitude to any 
downgrade of the lowest-rated bank offering the credit facility.

Fitch will upgrade the ratings of the securities in similar magnitude to any 
upgrade of the lowest-rated bank offering the credit facility.

Contact: 

Primary Analyst

Laura Zhai

Director

+852 2263 9974

Fitch (Hong Kong) Limited

19/F, Man Yee Building

68 Des Voeux Road, Hong Kong

Secondary Analyst

Li Chen

Associate Analyst

+86 21 5097 3009

Committee Chairperson

Kalai Pillay

Senior Director

+65 6796 7221

Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: 
wailun.wan@fitchratings.com.

Additional information is available on www.fitchratings.com

Applicable Criteria 

Corporate Rating Methodology - Including Short-Term Ratings and Parent and 
Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures 

Dodd-Frank Rating Information Disclosure Form 

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr 
_id=1008681

Solicitation Status 

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008681

Endorsement Policy 

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det 
ail=31

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