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Rating Action:

Moody's assigns B1 to CIFI's proposed USD senior unsecured notes

 The document has been translated in other languages

12 Apr 2018

Hong Kong, April 12, 2018 -- Moody's Investors Service has assigned a B1 senior unsecured rating to CIFI Holdings (Group) Co. Ltd.'s (Ba3 positive) proposed USD senior unsecured notes.

The company plans to use the bond proceeds to refinance existing debt.

The rating outlook is positive.

RATINGS RATIONALE

"The proposed senior unsecured notes will extend CIFI's debt maturity profile and will not have a material impact on its credit metrics, as the proceeds will mainly be used to refinance existing debt," says Stephanie Lau, a Moody's Vice President and Senior Analyst.

Moody's expects CIFI's credit metrics will remain appropriate for its Ba3 corporate family rating even if the proposed USD senior unsecured notes are issued.

Furthermore, Moody's expects CIFI's credit metrics to improve on the back of stronger revenue growth in the next 12-18 months, supported by robust property contracted sales. Its total contracted sales (including its share in joint ventures) in 2017 totaled RMB104 billion, representing 96.2% year-on-year growth.

Moody's expects that CIFI's EBIT/interest — including joint venture contributions — will improve moderately to around 3.4x-3.6x over the next 12-18 months from around 3.3x in 2017. And, its debt leverage — as measured by revenue/adjusted debt and including joint venture contributions — should improve to around 75%-80% over the next 12-18 months from 66% in 2017.

These projections reflect Moody's expectations that the company will record stronger revenue growth, and stable margins of around 25%-27% over the next 12-18 months, while maintaining a prudent expansion strategy.

CIFI's Ba3 corporate family rating reflects its property development model focused on catering to housing demand from upgraders in key tier 1 and tier 2 cities in China. Such a focus helps the company achieve rapid turnover.

The rating also takes into account the company's good liquidity, prudent land acquisition strategy, and growing diversification.

On the other hand, the rating also reflects its material exposure to joint ventures, which lowers the transparency of its credit metrics. However, such risk is mitigated by its strong liquidity management and reputable joint venture partners.

CIFI's liquidity position is strong. In particular, the company is managing well its debt maturity profile. Its cash on hand of RMB29.8 billion is sufficient to cover its maturing debt of RMB12.2 billion over the next 12-18 months, as well as committed land premium payments over the same period. Its cash/short-term debt registered 245% at the end of 2017.

The B1 rating of CIFI's senior unsecured debt is one notch lower than its corporate family rating of Ba3, reflecting structural subordination risks. This risk reflects the fact that the majority of claims is at the operating subsidiaries, and has priority over claims at the holding company in a bankruptcy scenario. In addition, the holding company lacks significant mitigating factors for structural subordination. As a result, the expected recovery rate for claims at the holding company will be lower.

The positive outlook on CIFI's Ba3 corporate family rating and B1 senior unsecured rating reflects Moody's expectation that CIFI's credit metrics will improve over the next 12-18 months, owing to its strong sales execution and prudent land acquisition strategy.

CIFI's ratings could be upgraded if the company: (1) sustains growth in sales and scale and achieves better geographic diversification; and (2) improves its credit metrics, with adjusted EBIT/interest above 3.5x-4.0x and revenue/adjusted debt above 85%-90% on a sustained basis.

On the other hand, the ratings outlook could return to stable if CIFI's performance and credit metrics fall below Moody's expectations; in particular, if its: (1) adjusted EBIT/interest falls below 3.0x; and/or (2) revenue/adjusted debt remains below 80%; and/or (3) liquidity weakens, with its cash holdings slipping below 1.5x of short-term debt.

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.

CIFI Holdings (Group) Co. Ltd. was incorporated in the Cayman Islands in May 2011 and listed on the Hong Kong Stock Exchange in November 2012.

CIFI develops residential and commercial properties mainly in the Yangtze River Delta. It has also expanded to the Pan Bohai Rim, the Central Western Region and South China region. At 31 December 2017, it maintained a total and attributable land bank of 26.1 million and 12.7 million square meters respectively. It also had 120 projects under development or held for future development, as of the same date.

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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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.

Franco Leung
Senior Vice President
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

Gary Lau
MD - Corporate Finance
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

No Related Data.
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