Hong Kong, March 31, 2020 -- Moody's has affirmed Greentown China Holdings Limited's Ba3 corporate
family rating (CFR), as well as the following ratings:
1.The Ba3 backed senior unsecured rating on the USD senior notes
issued by Greentown; and
2.The Ba3 backed senior unsecured rating on the senior perpetual
capital securities issued by Champion Sincerity Holdings Limited and guaranteed
by Greentown China Holdings Limited; and
3. The Ba3 backed senior unsecured rating on the senior perpetual
capital securities issued by Twinkle Lights Holdings Limited and guaranteed
by Greentown China Holdings Limited; and
4. The Ba3 backed senior unsecured rating on the senior perpetual
capital securities issued by Wisdom Glory Group Limited and guaranteed
by Greentown China Holdings Limited
At the same time, Moody's has changed the outlook on all ratings
to stable from positive.
RATINGS RATIONALE
"The change in outlooks to stable from positive reflects our expectation
that Greentown's credit metrics will stabilize over the next 12-18
months, as debt growth to support its land investments will largely
offset revenue growth," says Celine Yang, a Moody's Assistant
Vice President and Analyst.
Greentown spent around RMB 52.3 billion on an attributable basis
to acquire new land in 2019, accounting for around 75%-80%
of cash collected from its attributable property sales, which is
a high level when compared with many of its industry peers. As
a result, its reported net debt increased by 31.4%
to RMB43.7 billion at the end of 2019 from RMB33.2 billion
at the end of 2018, while revenue only increased by 2% to
RMB61.6 billion in 2019 from 2018.
While Moody's expects Greentown will scale back its land acquisitions
moderately in the coming 12-18 months from the high levels in 2019,
its leverage -- as measured by revenue/adjusted debt -- will
likely improve only moderately improve to 44%-45%
from 39% over the same period, and its interest coverage
-- as measured by EBIT/interest -- to 2.4x-2.5x
from 2.3x.
Moody's estimates that Greentown's attributable land bank
of around 22 million square meters by gross floor area at the end of 2019
will be enough to support its property development needs for about four
years.
Greentown's property sales fell by 28.3% year-on-year
to RMB6.6 billion in the first two months in 2020 compared to the
same period in 2019, driven mainly by the coronavirus outbreak.
Moody's expects the company's sales to stay weak in 1Q 2020 before recovering
gradually through the remainder of 2020.
Greentown's Ba3 corporate family rating continues to reflect its standalone
credit strength and a two-notch 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 standalone credit strength reflects its (1) well-established
market position in property development in Hangzhou city and Zhejiang
Province, (2) long operating track record, good brand name,
quality products and large nationwide land bank, and (3) improved
financial management and funding costs as part of CCCG.
The two-notch uplift incorporates Moody's assessment that CCCG
will extend strong support to Greentown in case of need, given that
(1) it has significant influence on the company as its largest shareholder;
(2) CCCG occupies four out of the six executive director seats on the
company's board of directors; and (3) CCCG has demonstrated its willingness
to provide financial support through a keepwell deed and a deed of equity
purchase, investment and liquidity support undertaking in respect
of Greentown's senior and perpetual bonds.
This view also factors in CCCG's strong ability to provide support,
underpinned by its large scale, strong business and financial profiles,
and good access to funding.
The stable outlook on Greentown's ratings reflects Moody's
expectation that the company will maintain its sales execution,
stable financial profile and adequate liquidity over the next 12-18
months. In addition, the outlook reflects Moody's expectation
that the support the company will likely receive from CCCG, in times
of need, will remain unchanged.
In terms of environmental, social and governance (ESG) considerations,
Moody's has considered (1) the company's financial policy to pursue
expansion, which has resulted in elevated leverage; (2) its
good track record in operations and execution; (3) the presence of
strong shareholders; (4) its disclosure of material related-party
transactions as required under the Corporate Governance Code for companies
listed on the Hong Kong Exchange; and (5) the presence of a diversified
board of directors and three special committees (including Audit Committee,
Remuneration Committee, and Nomination Committee) to supervise the
company's operations.
Greentown's board has 11 directors in total and four of them are independent
non-executive directors (INEDs). All three special committees
are chaired by INEDs.
The rapid and widening spread of the coronavirus outbreak, deteriorating
global economic outlook, falling oil prices, and asset price
declines are creating a severe and extensive credit shock across many
sectors, regions and markets. The combined credit effects
of these developments are unprecedented. China's property
sector has been one of the sectors affected by the shock given its sensitivity
to consumer demand and sentiment. Moody's regards the coronavirus
outbreak as a social risk under its ESG framework, given the substantial
implications for public health and safety.
Factors that would lead to an upgrade or downgrade of the ratings:
Greentown's rating could be upgraded if it strengthens its financial
and liquidity positions.
Specifically, Moody's could upgrade the rating if (1) revenue/adjusted
debt exceeds 55%-60%; and (2) EBIT interest
coverage rises above 2.5x.
A material reduction in contingent liabilities associated with joint ventures
or lower risks of providing funding support to joint ventures could also
be positive to the ratings. This could be a result of reduced usage
of joint ventures or material improvement in the financial strengths of
its joint venture projects.
Moody's could downgrade the rating if (1) contracted sales growth
slows; (2) credit metrics weaken, with EBIT/interest coverage
falling below 1.5x, or revenue/adjusted debt falling below
40% on a sustained basis; or (3) liquidity deteriorates,
as reflected by cash/short-term debt falling below 1.0x.
Moody's could also downgrade the rating if the company's contingent
liabilities associated with joint ventures or the risks of providing funding
support to joint ventures increase materially. This could be a
result of a material deterioration in the financial strengths and liquidity
of its joint venture projects or a substantial increase in investment
in new joint venture projects.
Principal Methodology
The principal methodology used in these ratings was Homebuilding And Property
Development Industry published in January 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1108031.
Alternatively, 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
the end of 2019, the company had 142 projects with a total gross
floor area (GFA) of 38.7 million square meters (sqm), with
22.4 million sqm attributable to the company.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. Unless
noted in the Regulatory Disclosures as a Non-Participating Entity,
the rated entities are participating and the rated entities or their agent(s)
generally provide Moody's with information for the purposes of its
ratings process. Please refer to www.moodys.com for
the Regulatory Disclosures for each credit rating action under the ratings
tab on the issuer/entity page and for details of Moody's Policy
for Designating Non-Participating Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to one of the credit rating
outcomes announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
YuYing (Celine) Yang
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
Client Service: 852 3551 3077
Franco Leung
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 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
Client Service: 852 3551 3077
