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Rpt fitch affirms indian railway finance corp at bbb stable


(Repeat for additional subscribers)June 9 (The following statement was released by the rating agency)Fitch Ratings has affirmed Indian Railway Finance Corporation Limited's (IRFC) Long-Term Foreign- and Local- Currency Issuer Default Ratings (IDRs) at 'BBB-'. The Outlook is Stable. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS IRFC's ratings are linked to the ratings of India (BBB-/Stable) due to IRFC's legal and funding ties with the Ministry of Railways (MoR). Fitch has classified IRFC as a dependent public sector entity. The company's strategy is dictated by the government of India, which tightly monitors and controls it. IRFC plays an important strategic role in India's railway sector because it is the sole financing arm of the MoR. The ratings derive strength from the MoR's ongoing support, as evidenced by regular equity injections into IRFC since its formation. IRFC's debt/equity ratio has been largely inside the 10x limit during the past three years. Fitch expects further capital injections from the MoR if the ratio exceeds the limit. The MoR injected INR6.0bn and INR6.3bn into IRFC in the financial year ending March 2013 (FY13) and FY14, respectively. IRFC is mainly involved in providing finance leasing to rolling stock such as locomotives, passenger coaches, and freight wagons. It financed around 25% of total funding to the MoR in FY13. Fitch expects IRFC to continue its collaboration with the government. Due to the large capital expenditure budgeted by the government, Fitch expects IRFC's debts to grow at 15%-20% per annum in the next two-three years. IRFC is wholly owned by the sovereign and its board of directors is appointed by the government. The MoR signs a memorandum of understanding with IRFC annually to set its operational and financial performance targets, which it reviews quarterly. The Comptroller and Auditor General of India appoints auditors to IRFC annually, enhancing government control.

Under the lease agreement between IRFC and the MoR, the MoR will cover any financial shortfalls by making advance payments for leases if IRFC does not have sufficient resources to redeem maturing bonds and/or repay loans. Fitch expects that future standard lease agreements will continue to contain a similar assurance, and that the MoR will provide funding to prevent liquidity mismatches that could lead to an IRFC default. IRFC's profitability is resilient and highly visible since its interest income is charged on a cost mark-up basis, and the capital investment pipeline of the Indian railway sector is strong. Fitch expects the company's net profit to increase by around 10% per annum in the next two years, mainly due to the rise of outstanding lease receivables. Its assets and liabilities are closely matched. Its solid reputation in capital markets means the IRFC can easily access domestic capital markets and banks for low-cost long-term funding. RATING SENSITIVITIES

A positive rating action would stem from a similar change in the ratings of the sovereign in conjunction with continued strong support from the state. Significant changes to IRFC's legal status which would lead to a dilution of control or likelihood/timeliness of support by the sovereign may result in the ratings being notched down from the sovereign ratings. The full list of rating actions follows:

IRFC Long-Term Foreign Currency IDR affirmed at 'BBB-'; Outlook StableLong-Term Local Currency IDR affirmed at 'BBB-'; Outlook StableJPY12bn 2.85% term-loan due 2026 affirmed at 'BBB-'JPY3bn 2.9% term-loan due on 2026 affirmed at 'BBB-'USD200m 4.406% senior unsecured notes due 2016 affirmed at 'BBB-'USD300m 3.417% senior unsecured notes due 2017 affirmed at 'BBB-'USD500m 3.917% senior unsecured notes due 2019 affirmed at 'BBB-'

Trlpc hkma reviews hong kong based taiwanese banks chinese loans


Nov 5 The Hong Kong Monetary Authority (HKMA) has launched an onsite examination into Hong Kong-based Taiwanese banks' loan exposure to mainland Chinese companies, banking sources said on Tuesday. The HKMA, which is responsible for maintaining Hong Kong's monetary and banking stability, stepped up its supervision of Hong Kong banks since October 2013 after a steep rise in offshore lending to mainland Chinese companies by Hong Kong banks. This is however the first onsite examination by the HKMA targeting Taiwanese banks' lending to Chinese companies, bankers said. Taiwanese banks are some of Asia's biggest lenders and their loan exposure to Chinese companies has been in focus since the summer after fears of defaults by privately-owned Chinese companies rose earlier this year. The HKMA started to examine the Hong Kong units of Bank of Taiwan in August and CTBC Bank in September and is scheduled to visit First Commercial Bank and Taiwan Cooperative Bank in November, the sources said. Each onsite investigation is expected to continue for nearly two weeks."The HKMA has regular onsite examinations such as Know Your Customer. But this is the first one concentrated on loans to Chinese firms," a Hong Kong-based loan banker at a Taiwanese bank said. The HKMA declined to comment on the details of the onsite examination.

Similar investigations are taking place in Taiwan into the exposure of the country's banking sector to Chinese loans, particularly for privately-owned companies. The Ministry of Finance asked Taiwan's state-owned banks to provide details of outstanding loans to Chinese companies in early October. The investigation was broadened to commercial banks by Taiwan's Financial Supervisory Commission (FSC) in late October. DETAILS REQUESTED

The HKMA sent out a two-part questionnaire to Hong-Kong based Taiwanese banks asking for general information on lending to mainland Chinese corporates and management information systems. The investigation by HKMA is focusing more on how we manage our risks of lending to Chinese companies, while the ones by Taiwanese authorities are more data collection," a second Hong Kong-based banker with a Taiwanese bank said. The HKMA has asked Taiwanese banks in Hong Kong to submit details of their internal structures, including employee information on credit approval, marketing, processing and monitoring, the sources said. They have also been asked to outline the growth of mainland lending in the last six months, reasons for the growth and their business strategies for Chinese companies in 2014.

The HKMA is also seeking information on credit risk management, credit risk mitigation tools and risk control limits on loans for mainland Chinese companies."In the survey, the HKMA has asked us about the difference of our due diligence, post-lending monitoring, loan classifications and impairment allowances between mainland and non-mainland (Chinese) companies," a third Hong Kong based banker at a Taiwanese bank said."This includes what kind of credit risk mitigation tools we have, such as guarantee, security, property or standby letter of credit on loans," she added. Taiwanese banks had $27.909 billion of outstanding loans to Chinese companies and individuals in offshore banking units and overseas branches at the end of August 2014, according to Taiwan's FSC. Overdue loans totalled $40 million and the overdue loan ratio stood at 0.14 percent. Chinese onshore companies borrowed HK$2.276 trillion (US$293.6 billion) of customer loans in 2013, excluding HK$313 billion of trade finance loans, according to the HKMA said. The HKMA said that it is reviewing the lending of all authorised institutions in Hong Kong and is not targeting Taiwanese banks corporate lending directly."All authorised institutions are subject to the supervision of the HKMA. The HKMA will review the lending activities of all authorised institutions as part of its ongoing supervision through onsite examination and offsite surveillance to ensure that their practices are prudent," an HKMA spokesperson said.