Fitch Ratings has assigned China's Neijiang Investment Holding Group's proposed US dollar credit-enhanced bonds an A rating.

Neijiang, which provides infrastructure construction services in China, will use the proceeds for general corporate purposes.

Solid backingFitch says the rating reflects the bond's credit enhancement through a standby letter of credit (L/C).

It will be provided to investors by the Sichuan branch of the Bank of China (BOC), one of the four biggest Chinese state-owned commercial banks.

The note is rated at the same level as BOC's Long-Term Issuer Default Rating (IDR) as the bank is bound by the agreements made by its branches and thus the transaction is considered a senior unsecured obligation of BOC.

L/C benefits

Investors will have the benefit of the irrevocable standby L/C denominated in US dollars issued by BOC that will expire one month after the maturity of the bonds.

The standby L/C amount includes any amount that the issuer has failed to pay into the prefunding account when required to do so before any payment dates, including at the maturity of the bonds.

In the event of a default by the issuer, BOC would be obliged to pay investors both the outstanding principal and interest payable.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.