Hong Kong, — Moody’s Investors Service has assigned a Ba3 senior unsecured debt rating to the proposed USD senior perpetual capital securities to be issued by Champion Sincerity Holdings Limited and irrevocably and unconditionally guaranteed by Greentown China Holdings Limited.
Greentown plans to use the proceeds of the new USD notes issuance to refinance existing indebtedness and for general working capital purposes.
RATINGS RATIONALE
“The proposed note issuance will not have a material impact on Greentown’s credit metrics, because the proceeds will mainly be used to refinance existing debt,” says Celine Yang, a Moody’s Assistance Vice President and Analyst.
Greentown’s Ba3 corporate family rating continues to reflect its standalone credit strength and a two-notch rating uplift, based on Moody’s expectation that the company will receive extraordinary financial support from China Communications Construction Group (Limited) (CCCG), its largest shareholder, in times of financial distress.
Greentown’s B2 standalone credit strength reflects its (1) well-established market position in property development in Hangzhou City and Zhejiang Province, (2) long operating track record, in particular, its established brand name, quality products and land bank with 70% of saleable value located in first and second tier cities, (3) improved financial management and access to funding as part of CCCG; and (4) adequate liquidity
However, the B2 standalone credit strength is constrained by its improving but still moderate financial metrics, as a result of debt-funded growth and operating challenges stemming from its growth through joint ventures and associates.
The Ba3 rating for the notes reflects the following factors:.
(1) Moody’s considers the proposed perpetual securities as pure debt instruments and accordingly, does not apply any equity treatment to these securities.
(2) The perpetual securities will be irrevocably and unconditionally guaranteed by Greentown, which implies that the rating on the perpetual securities is closely linked to Greentown’s rating.
(3) The securities will rank pari passu with all other present and future senior obligations of Greentown.
The positive ratings outlook reflects Moody’s expectation that Greentown will maintain financial discipline, generate steady growth in contracted sales and control its debt growth, while pursuing an expansion strategy in the coming 12-18 months.
Greentown’s ratings could be upgraded if the company (1) continues to show prudence in its financial management and land acquisition strategy; and (2) improves its debt leverage, such that revenue/adjusted debt — including its share in joint ventures and associates — is maintained above 60%-70% and EBIT/interest — including shares in joint ventures and associates — is maintained above 2.5x.
A downgrade of Greentown’s ratings is unlikely in the near term, given the positive ratings outlook. However, the outlook could return to stable, if the company’s credit metrics are unlikely to improve to levels that will support an upgrade over the next 12-18 months.
The principal methodology used in this rating was Homebuilding And Property Development Industry published in January 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Greentown China Holdings Limited is a major property developer in China, with a primary focus in Hangzhou City and Zhejiang Province.
At 30 June 2018, the company had 106 projects with a total gross floor area of 32.97 million square meters (sqm), with 20.73 million sqm attributable to the company.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
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