Hong Kong, December 19, 2018 -- Moody's Investors Service has assigned a B3 senior unsecured rating to
the USD notes to be issued by Yango Justice International Limited and
guaranteed by Yango Group Co., Ltd (Yango, B2 stable).
The company plans to use the bond proceeds mainly to refinance existing
debt.
RATINGS RATIONALE
"The proposed note issuance will slightly extend Yango'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 Celine Yang, a Moody's Assistant Vice President and analyst.
Yango's B2 corporate family rating (CFR) reflects the company's strong
sales execution, large scale, and good track record in Fujian
Province and the Yangtze River Delta. It is also supported by its
ability to access the domestic debt market.
On the other hand, the company's B2 rating is constrained by its
high leverage due to its sizeable land acquisitions to support its rapid
growth and expansion into new regions, as well as its weak liquidity.
Nevertheless, Moody's expects the company to adopt a more measured
approach to land acquisitions. Accordingly, its growth in
debt will likely slow over the next 2 years.
As a result, revenue/adjusted debt could improve to around 50%-60%
and interest coverage to 2.0x-2.3x in the next 12-18
months from 33% and 1.9x respectively for the 12 months
to 30 June 2018. Such levels are comparable with those of its B2-rated
Chinese property peers.
Yango's cash balance of RMB33.3 billion at the end of June 2018
was insufficient to cover its short-term debt of around RMB44.2
billion. Moody's expects the company to continue to utilize
its operating cash flows and raise new financing to meet its refinancing
needs in the next 12 months.
The B3 rating for Yango's senior unsecured notes is one notch lower than
its CFR of B2, reflecting structural subordination risks.
This risk reflects 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. As a result, the expected recovery
rate for claims at the holding company will be lower.
Yango's stable rating outlook reflects Moody's expectation that Yango
will (1) manage the refinancing of its short-term debt; (2)
maintain its strong contracted sales growth; and (3) adopt a more
measured approach towards land acquisitions to improve its liquidity and
financial metrics over the next 12 to 18 months.
Upward ratings pressure could emerge if Yango improves its liquidity and
debt leverage positions, while maintaining strong contracted sales
growth.
Credit metrics indicative of upward rating pressure include: (1)
revenue/adjusted debt above 60%-65%, (2) EBIT/interest
cover above 2x; and (3) cash/short-term debt above 1.25x
on a sustained basis.
Downward rating pressure could emerge if there is a deterioration in Yango's
credit metrics or liquidity position, such as increased refinancing
risk.
Credit metrics indicative of downward ratings pressure include EBIT/interest
coverage below 1.25x-1.50x.
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.
Yango Group Co., Ltd is a Chinese property developer focused
on the Greater Fujian, Yangtze River Delta, and Pearl River
Delta regions. It listed on the Shenzhen Stock Exchange in 2002.
Its operations are mainly focused on mass-market residential property
development. It had a total land bank of around 42.7 million
square meters as of 30 June 2018.
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.
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.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. Unless
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generally provides Moody's with information for the purposes of
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for the Regulatory Disclosures for each credit rating action under the
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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
Clement Wong
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
