Hong Kong, June 21, 2021 -- Moody's Investors Service has assigned a Ba3 senior unsecured rating
to the EUR notes to be issued by Fortune Star (BVI) Limited, and
unconditionally and irrevocably guaranteed by Fosun International Limited
(Fosun, Ba3 stable).
The rating outlook is stable.
Fosun will use the proceeds to refinance its offshore debt.
RATINGS RATIONALE
"The Ba3 rating reflects the guarantee from Fosun and the proposed
notes' equal ranking with all other senior unsecured obligations
of Fosun." says Lina Choi, a Moody's Senior Vice President.
Fosun's Ba3 corporate family rating reflects its (1) large and diversified
investment portfolio, (2) proven investment track record,
and (3) substantial amount of marketable securities.
However, the rating is constrained by Fosun's (1) high and increasing
leverage at the consolidated level due to its debt-funded investment
strategy, (2) reliance on short-term funding for long-term
investments, (3) weak interest coverage at the holding company level,
and (4) credit contagion risk from a few weak investees, such as
Fosun Tourism Group and Shanghai Forte Land Company Limited.
Moody's expects the COVID-19 pandemic to have limited impact
on Fosun's credit profile because most of the company's businesses
and investments are in China, except for its tourism and insurance
businesses. Although its tourism business will continue to be affected
by the ongoing pandemic, the business only accounts for a small
percentage of Fosun's portfolio and consolidated revenue.
Moody's also expects the credit quality of Fosun's insurance
businesses, which are mostly outside of China, to remain resilient.
As a result, Moody's projects Fosun's key credit metrics
will remain stable in 2021. Its market value-based debt
leverage (MVL) ratio will stay at around 35% as the company maintains
a prudent investment policy, whereby the majority of its investments
are funded by proceeds from divestures and by new debt to a lesser degree.
In addition, Fosun's weak adjusted (funds from operations
[FFO] +interest)/interest coverage ratio at the holding company
level will remain below 1x over the next 12-18 months.
On the other hand, Fosun's adjusted consolidated debt/capitalization
increased moderately to around 54.5% as of end of 2020 from
around 53.6% as the end of 2019. The increase was
mainly attributed to growing debt at Fosun's major subsidiaries
as they sought to preserve cash during the challenging market environment
in 2020, as well as the large investment needs of a few key subsidiaries.
Although the higher leverage at these subsidiaries indicate Fosun's
weakening credit quality, Moody's does not expect credit contagion
risk to materially increase. Moody's forecasts Fosun's
adjusted consolidated debt/capitalization will stay at around 55%
over the next 12 months, absent major acquisitions.
Fosun's liquidity profile remains weak because it relies heavily
on short-term debt to fund its long-term investments,
and its cash on hand is insufficient to cover its short-term debt
maturing over the next 12 months. Nevertheless, Fosun has
managed its debt refinancing during 2020, given its continued access
to onshore and offshore bond and loan markets with reasonable financing
costs. Moody's also expects Fosun's management to take
measures to improve the company's liquidity profile, such
as lengthening its debt maturity profile and relying less on short-term
debts to fund its long-term investments. The proposed issuance
of EUR bonds will help improve Fosun's debt maturity profile.
In terms of environmental, social and governance (ESG) factors,
Moody's has considered governance risk stemming from the concentrated
ownership of Fosun in its controlling shareholder and chairman,
Mr. Guo Guangchang, who held a 61.19% stake
as of 31 December 2020. Moreover, the company has a complex
and evolving investment portfolio, with limited transparency regarding
its investments in non-listed companies.
These risks are partially tempered by the company's listing on the Hong
Kong Stock Exchange. As of May 2021, Fosun's 14-member
board comprises three non-executive directors and five independent
non-executive directors. Furthermore, the company
has provided regular training to its directors, and has audit,
remuneration and nomination committees, comprising independent non-executive
directors.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The stable outlook incorporates Moody's expectation that Fosun will
prudently manage its expansion and maintain its access to domestic and
offshore credit markets.
Moody's could upgrade the rating on the proposed senior notes if
Moody's upgrades Fosun's corporate family rating.
Moody's could upgrade Fosun's ratings if (1) the credit quality
of Fosun's investment portfolio and key investees improves,
(2) Fosun's financial metrics improve, such as its adjusted
consolidated debt/capitalization ratio remains below 50% and adjusted
(FFO+interest)/Interest coverage ratio at the holding company level
stays above 1x on a sustained basis, and (3) its liquidity profile
materially strengthens, including a longer debt maturity profile
and much reduced reliance on short-term debt.
Likewise, Moody's could downgrade the rating on the proposed
senior notes if Moody's downgrades Fosun's corporate family
rating.
Moody's could downgrade Fosun's ratings if (1) the quality of the company's
investment portfolio deteriorates or contagion risk from its investees
rises, (2) its adjusted consolidated adjusted debt/capitalization
stays above 56%-58%, (3) a much reduced recurring
income at the holding company level results in a further weakening in
its adjusted (FFO+interest)/interest, or (4) the company's
reliance on short-term funding increases, pushing its short-term
debt to total reported debt above 50%, all on a prolonged
period.
The principal methodology used in this rating was Investment Holding Companies
and Conglomerates published in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1125855.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Fosun International Limited (Fosun) is headquartered in Shanghai and was
listed on the Hong Kong Stock Exchange in 2007.
Fosun has diversified businesses spanning three broad categories:
(1) integrated finance (Wealth); (2) tourism, leisure and consumer
(Happiness); (3) and pharmaceuticals, medical services and
health products (Health).
The market value of Fosun's investment portfolio totaled around RMB271
billion as of the end of 2020. The consolidated group's revenue
totaled RMB137 billion in 2020.
The local market analyst for this rating is Kai Hu, +86 (212)
057-4012.
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.
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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.
Lina Choi
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
