Hong Kong, September 15, 2020 -- Moody's Investors Service has assigned a B1 rating to the proposed
senior unsecured USD notes to be issued by Times China Holdings Limited
(Ba3 stable).
The rating outlook is stable.
Times China will use the proceeds from the proposed issuance mainly to
refinance certain of its existing debt.
RATINGS RATIONALE
"The proposed notes will not materially impact Times China's financial
profile or Ba3 corporate family rating, because it will mainly use
the proceeds to refinance existing debt," says Danny Chan,
a Moody's Assistant Vice President and Analyst, and also Moody's
Lead Analyst for Times China.
Moody's expects Times China's leverage, as measured
by revenue/adjusted debt, to improve towards 75% over the
next 12-18 months from 60% for the 12 months that ended
June 2020. This improvement will be driven by an expected recovery
in revenue growth and slowing debt growth, thanks in turn to the
growing conversion of redevelopment projects that lower capital spending
on land acquisitions.
Moody's expects the company's interest-servicing ability,
as measured by adjusted EBIT/interest coverage, will improve to
around 3.5x over the same period from 2.7x for the 12 months
that ended June 2020, underpinned by stable gross margins.
Such credit metrics support the company's Ba3 corporate family rating
(CFR).
Times China's gross contracted sales increased by 10% year-on-year
to RMB40.4 billion for the first seven months of 2020 despite the
impact of coronavirus outbreak. Moody's expects contracted sales
will remain largely stable in 2020 when compared to 2019, supported
by abundant saleable resources and the company's good execution track
record. The company registered 29% year-on-year
growth in contracted sales to RMB78.4 billion in 2019.
Times China's Ba3 CFR reflects its growing operating scale, established
brand, and good track record of property development in Guangdong
Province. The rating also takes into account the company's stable
profit margins and strong liquidity profile.
However, the company's Ba3 CFR is constrained by its geographic
concentration in Guangdong Province.
The B1 rating on the proposed notes reflects the risk of structural subordination,
given the fact that the majority of claims are at the operating subsidiaries
and have priority over claims at the holding company in a bankruptcy scenario.
In addition, the holding company lacks significant mitigating factors
for structural subordination, reducing the expected recovery rate
for claims at the holding company level.
Times China's liquidity is good. Moody's expects the company's
cash holdings along with its operating cash flow will be sufficient to
cover its committed land payments and maturing debt in the next 12-18
months.
The company's reported cash balance of RMB34.5 billion as of 30
June 2020 also well covered its short-term debt of RMB24.1
billion.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The stable outlook on Times China's CFR reflects Moody's expectation
that the company will maintain growth in its contracted sales, as
well as carry out disciplined land acquisitions and debt management to
maintain a financial profile that is consistent with its Ba3 CFR.
Moody's could upgrade the ratings if Times China registers stable
growth in sales and an increased operating scale, maintains strong
liquidity, and records an improvement in its credit metrics.
Credit metrics indicative of an upgrade include cash/short-term
debt above 1.5x, EBIT/interest coverage above 3.5x
and revenue/adjusted debt above 75%-80% on a sustained
basis.
Conversely, Moody's could downgrade the ratings if the company
registers a decline in sales, an increase in its debt leverage or
a weakening in its liquidity position, or undertakes aggressive
land or project acquisitions.
Credit metrics indicative of a downgrade include cash/short-term
debt below 1.0x, EBIT/interest coverage below 2.5x
or revenue/adjusted debt below 60% on a sustained basis.
The principal methodology used in this rating 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.
Times China Holdings Limited is a property developer based in Guangdong
Province, focused on meeting end-user demand for mass-market
housing. As of 30 June 2020, the company had 130 property
projects across 12 cities in Guangdong Province, and in some major
provincial cities outside Guandong Province, such as Changsha,
Wuhan, Chengdu and Hangzhou. The company's land bank totaled
around 21.8 million square meters (sqm) as of the same date.
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
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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
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60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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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.
Danny Chan
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
