Hong Kong, January 07, 2021 -- 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 plans to use the proceeds from the proposed notes to refinance
its existing offshore debt.
RATINGS RATIONALE
"Times China's Ba3 corporate family rating (CFR) reflects its growing
operating scale, leading market position in Guangdong Province and
strong liquidity profile," says Danny Chan, a Moody's Assistant
Vice President and Analyst, and also Moody's Lead Analyst for Times
China.
"However, the company's Ba3 CFR is constrained by its geographic
concentration in Guangdong Province," adds Chan.
Moody's expects Times China's leverage, as measured by revenue/adjusted
debt, to improve to 75%-80% over the next 1-2
years from 60% for the 12 months ended June 2020, supported
by steadily increasing revenue recognition from strong contracted sales
over the past 2-3 years and slowing debt growth.
Similarly, Moody's expects the company's interest-servicing
ability, as measured by adjusted EBIT/interest coverage, will
improve to 3.4x-3.7x over the same period from 2.7x
for the 12 months ended June 2020, supported by an improvement in
debt leverage and controlled financing costs. Such credit metrics
support the company's Ba3 CFR.
Times China's gross contracted sales increased 28% to RMB100 billion
in 2020 compared with the previous year, following a solid 29%
growth in 2019. Moody's expects the company's annual contracted
sales growth will remain healthy at around 10%-15%
per annum over the next 1-2 years, supported by abundant
saleable resources and the company's good execution track record.
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. In addition, the company's reported cash balance
of RMB34.5 billion as of 30 June 2020 provides good coverage for
its short-term debt of RMB24.1 billion.
In terms of environmental, social and governance (ESG) factors,
Moody's has taken into consideration Times China's concentrated ownership
by its key shareholder, Shum Chiu Hung and his wife, who jointly
hold a 61.5% stake in the company as of the end of June
2020. This is mitigated by the presence of three independent nonexecutive
directors on the company's six-member board of directors,
the fact that independent nonexecutive directors chair both the audit
and remuneration committees, and the presence of other internal
governance structures and standards as required under the Corporate Governance
Code for companies listed on the Hong Kong Stock Exchange.
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 achieves stable growth
in sales and an increased operating scale, maintains a strong liquidity
position and improves 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.
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 31 December 2019, the company had 127 property
projects across 12 cities in Guangdong Province, Changsha in Hunan
Province, Wuhan in Hubei Province, Chengdu in Sichuan Province
and Hangzhou in Zhejiang Province. The company's land bank totaled
around 23 million sq.m 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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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
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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
