[For Immediate Release]
Xinhua Far East applauds progress of CAO’s restructuring and upgrades the issuer
rating of CAO to investment grade
HONG KONG, December 7, 2005 – Xinhua Far East China Ratings (Xinhua Far East) today
upgrades the issuer credit rating of China Aviation Oil (Singapore) Corp Ltd (“CAO” or “the
Company”, SGX ChinaAviOil) from C to BBB+. The rating is also on review for further possible
upgrade.
The rating action is prompted by the considerable progress made in the restructuring of CAO
which will not only lead to an injection of USD 130 million new capital to CAO but also catalyze
improvement in risk management and corporate governance by the two strategic investors,
respectively linked to BP and Temasek Holding. In Xinhua Far East’s opinion, this latest
development will give rise to a viable restructuring plan that will revitalize CAO’s credit profile
which was abruptly devastated by the Company’s massive derivative trading loss last
December. As such, it will be able to restore an investment grade credit risk profile quickly.
Furthermore, Xinhua Far East believes that the demonstrated support by CAOHC and strategic
investment by BP will reinforce CAO’s dominant market position in fast growing jet fuel sector
in China, and thereby increase the likelihood for a further rating upgrade in next 18 months.
According to CAO’s latest announcement, it has signed a conditional investment agreement
with its holding company, China Aviation Oil Holding Company (“CAOHC”), and BP Investment
Asia Ltd (“BP”), and a conditional subscription agreement with Aranda Investments Pte Ltd
(“Aranda”), an indirect wholly-owned subsidiary of Temasek Holdings (Private) Ltd. According
to the investment agreements, the three companies will inject US$130 million into CAO, of
which CAOHC will invest US$75.77 million and will have a majority stake of 51%
post-restructuring, BP will invest US$44 million for a post-restructuring stake of 20% and
Aranda will invest US$10.23 million for a 4.65% post-restructuring stake.
During the past year, CAO’s restructuring process has remained on track. Its Scheme of
Arrangement (“the Scheme”) was overwhelmingly approved by its creditors in June 2005 and
amid the buoyant growth in China’s jet fuel market, the Company has effectively resumed its
jet fuel procurement operations through its wholly-owned subsidiary, China Aviation Oil
Trading Ptd Ltd (“CAOT”) since last December.
Xinhua Far East acknowledges that the Company’s investment agreements with CAOHC, BP
and Aranda, albeit provisional in nature, present a critical breakthrough in the restructuring
process and greatly eliminate the uncertainties about rehabilitation of CAO as a going concern.
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In particular, the rating upgrade factors into Xinhua Far East‘s expectation that BP will
expedite the overhaul of CAO’s corporate governance and operations, especially risk
management, via its right to nominate two directors in CAO’s board and various co-operative
agreements with CAO or CAOHC.
Furthermore, Xinhua Far East recognizes that the injection of USD 130 million new capital
along with CAO’s robust core business will bolster its financial strength to repay its deferred
debt of US$145 million. The rating upgrade also factors into Xinhua Far East’s expectation that
CAO will maintain its leading position in jet fuel import business.
CAO was incorporated in Singapore in 1993 and went public on the Singapore Exchange (‘SGX’)
in December 2001. CAO was the largest jet fuel supplier in China and eighth largest in the
world. Its core business is in the procurement of jet fuel for distribution to the China’s civil
aviation industry and the Company supplied nearly 100% of imported jet fuel to China. It also
owns a 33% stake in Shanghai Pudong International Airport Aviation Fuel Supply Co Ltd
(‘SPIA/AFSC’) and purchase of a 5% equity interest in Compania Logistica De Hidrocarburos
CLH, S.A. (‘CLH’), Spain’s largest refined products transportation and storage business. In
December 2004, CAO incurred huge losses in derivative trading and applied for a Scheme of
Arrangement in Singapore court.
China Aviation Oil Holding Company (‘CAOHC’) is CAO’s largest shareholder. CAOHC is a large
state-owned aviation transportation logistics group and is one of the six civil aviation group
companies in China. It is under the direct leadership of China’s State Council. As China’s
largest air transportation service enterprise, CAOHC has constructed 155 oil depots at 94
airports with a total storage capacity of 1.4 million cubic meters, forming an independent,
complete aviation fuel supply system across the country. In October 2004, CAOHC reduced its
interest in CAO from 75% to approximately 60%.
BP is one of the world’s largest energy companies with oil and gas businesses in both
upstream and downstream sectors. Aranda is an indirect wholly-owned subsidiary of Temasek
Holdings (Private) Ltd. Temasek Holdings is the investment arm of Singaporean government
and has about US$63 billion in assets under management.
For the rating report summary, please visit www.xinhuafinance.com/creditrating.
ends
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More Information:
Hong Kong
Joy Tsang, Director of Corporate Communications, Xinhua Finance
+852-3196-3983, +852-9486-4364, joy.tsang@xinhuafinance.com
US
Taylor Rafferty (PR/IR Contact in the US)
Mr. Yuhau Lin/ Mr. David Leeney, +1 212 889 4350, xinhuafinance@taylor-rafferty.com
Note to Editors:
About Xinhua Far East China Ratings
Xinhua Far East China Ratings (Xinhua Far East) is a pioneering venture in China that aims to rank credit
risks among corporations in China. It is a strategic alliance between Xinhua Financial Network, a Xinhua
Finance subsidiary, and Shanghai Far East Credit Rating Co., Ltd. Shanghai Far East became a Xinhua
Finance partner company in 2003 and the first China member of The Association of Credit Rating
Agencies in Asia in December 2003.
Capitalizing on the synergy between Xinhua Finance and Shanghai Far East, Xinhua Far East’s rating
methodology and process blend unique local market knowledge with international rating standards.
Xinhua Far East is committed to provide investors with independent, objective, timely and
forward-looking credit opinions on Chinese companies. It aims to help investors differentiate the credit
risks among the corporations in China, thereby, cultivating their awareness and promoting information
disclosures and transparency in China market. For more information, see www.xfn.com/creditrating.
About Xinhua Finance Limited
Xinhua Finance Limited is China’s premier financial services and media company and is listed on the
Mothers board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY). Rooted in China with
a global presence, Xinhua Finance serves financial institutions, corporations and re-distributors through
four focused and complementary service lines: Indices, Ratings, Financial News and Investor Relations.
Founded in 1999 and based in Hong Kong, the Company has 17 offices and 22 news bureaus across
Asia, Australia, North America and Europe and covers key Chinese and international markets.
For more information, please visit www.xinhuafinance.com.
About Shanghai Far East Credit Rating Co., Ltd
Shanghai Far East Credit Rating Co., Ltd. is the first and leading professional credit rating company with
comprehensive business coverage in China. It is an independent agency established by the Shanghai
Academy of Social Sciences with the mission to develop internationally accepted standards for capital
market in China. The company is a pioneer in conducting bond-rating business in China. For years, it
has been authorized by the Shanghai branch of the PBOC to undertake loan certificate credit rating.
Since establishment, it has rated over 1,000 corporate long-term bonds and commercial papers, based
on the principles of objectivity, fairness and independence. The company has also maintained over 50%
market share in the loan certificate-rating sector in Shanghai for three consecutive years. With its
strong local presence and knowledge, it provides investors with unique and the most insightful credit
opinion. For more information, see www.fareast-cr.com.
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