Hong Kong, February 06, 2012 -- Moody's Investors Service has assigned a Baa2 rating to the proposed bond
issuance of up to USD500 million by China Overseas Finance (Cayman) IV
Limited, and guaranteed by China Overseas Land and Investment Limited
(COLI).
At the same time, Moody's has affirmed COLI's Baa2 issuer and senior
unsecured debt ratings.
The ratings outlook is stable.
The proceeds from the proposed bonds will be used to refinance existing
debt, fund new and existing projects, and for other general
corporate purposes.
RATINGS RATIONALE
"The proposed bond issue is in line with our expectation that COLI will
raise new and longer-term debt to fund its operations and refinance
its existing debt," says Kaven Tsang, a Moody's Assistant
Vice President and Analyst.
"After the bond issuance, the company's adjusted net debt/capitalization
ratio remains consistent with Moody's expectation of 30%-35%,
which continues to support its Baa2 rating," adds Tsang, who
is also Moody's lead analyst for COLI.
Moreover, the proposed offshore debt has a five-year tenor
and will extend COLI's debt maturity profile and boost its liquidity amidst
the challenging operating environment that is likely to continue in the
next 12 months.
The company's strong sales, which totaled HKD87.1 billion
for the full year 2011, continue to support its credit and liquidity
profiles.
The Baa2 ratings also reflect COLI's leading market position in China's
property sector, including its track record for business execution
through the cycle and its strong cash flow.
The ratings outlook is stable, reflecting Moody's expectation that
the company will maintain its financial discipline and prudence while
pursuing further expansion.
An upgrade in the near term is unlikely, given the volatile nature
of China's property development sector and the high regulatory risks associated
with it.
On the other hand, the ratings would be downgraded if: (1)
there is a significant market downturn, such that COLI's sales performance
becomes materially weaker than expected, and (2) it incurs a sizable
amount of debt, to fund land acquisitions, such that its adjusted
net leverage exceeds 30%-35% and EBITDA interest
coverage falls below 6x-7x.
Any signs that the company's liquidity is weakening--to
the extent that cash falls below 10% of total assets on a sustained
basis--or its access to funding is reduced would also weigh
on its ratings.
The principal methodology used in rating COLI was the Global Homebuilding
Industry Methodology published in March 2009. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
China Overseas Land & Investment, listed on the Hong Kong Stock
Exchange, is a 54.07% owned subsidiary of China State
Construction & Engineering Corporation Limited (unrated) and one of
the largest property developers in the country. It had an attributable
land bank of 37.1 million sqm in gross floor area in 31 cities
in mainland China, Hong Kong and Macau that can support four to
five years of development.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available
on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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,
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the lead rating analyst and to the Moody's legal entity that has issued
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Kaven Tsang
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
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Peter Choy
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
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Moody's assigns Baa2 to COLI's proposed USD bonds
