Hong Kong, February 28, 2019 -- Moody's Investors Service has assigned Ba3 senior unsecured ratings to
the USD notes to be issued by Agile Group Holdings Limited (Ba2 stable).
Agile plans to use the proceeds from the proposed notes to refinance existing
indebtedness.
RATINGS RATIONALE
"The proposed notes issuance will provide Agile with additional liquidity
and moderately lengthen its debt maturity profile, while the impact
on its credit metrics will be limited, because it will use the proceeds
mainly to refinance debt," says Kaven Tsang, a Moody's Senior
Vice President.
Agile's Ba2 corporate family rating reflects its strong track record of
property development in Guangdong and Hainan provinces, disciplined
financial management, adequate liquidity with good access to the
offshore debt and banking markets, and decent profitability benefitting
from its low land costs.
Moody's expects Agile's presales, including those of joint ventures
and associates, to grow moderately to around RMB110-RMB115
billion in 2019, after registering a 14% growth to RMB102.7
billion in 2018. This presale performance will support future revenue
recognition.
In addition, Agile is likely to maintain its gross margin at a high
level of around 35% for the next 12-18 months, because
of its low land cost and the high margins of its projects in Hainan and
Zhongshan. This margin level provides the company with a buffer
against a price decline if China's property market softens over the same
period.
Over the next 12-18 months, Moody's expects that the company's
revenue/adjusted debt will register 70%-75% and EBIT/interest
4.0x-4.5x. These ratios position Agile at
its Ba2 corporate family rating.
Agile's liquidity position is adequate. Its cash holdings of RMB29.5
billion at 30 June 2018, together with its sales proceeds from pre-sales,
will be sufficient to cover its short-term debt of RMB29.9
billion and committed land premiums over the next 12-18 months.
At the same time, Agile's corporate family rating is constrained
by the company's material exposure to Guangdong and Hainan provinces,
the impact of potential regulatory tightening on property sales in its
key operating cities, and execution risks associated with its fast
expansion in property and new businesses.
Agile's Ba3 senior unsecured ratings are one notch lower than its corporate
family rating due to structural subordination risk. This risk reflects
the fact that the majority of claims are at the operating subsidiaries.
These claims have priority over Agile's senior unsecured claims in a bankruptcy
scenario.
In addition, the holding company lacks significant mitigating factors
for structural subordination. As a result, the likely recovery
rate for claims at the holding company will be lower.
The stable ratings outlook reflects Moody's expectation that Agile will
maintain a disciplined approach to land acquisitions and business expansion,
moderate growth in scale, stable financial metrics and an adequate
liquidity position over the next 12-18 months.
Upward ratings pressure could develop if Agile grows its scale while (1)
maintaining a strong liquidity position; and (2) improving its credit
metrics, with adjusted revenue/debt above 95%-100%
and EBIT/interest coverage above 5.0x-5.5x on a sustained
basis.
Downward ratings pressure could emerge if Agile's contracted sales fall
and credit metrics weaken, with EBIT/interest coverage falling below
3.5x or adjusted revenue/debt falling below 70%-75%.
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.
Agile Group Holdings Limited is a major property developer in China,
operating in the mid- to high-end segment. At 30
June 2018, the company had a land bank with a total gross floor
area of 35.4 million square meters in 69 cities and districts in
China.
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
noted in the Regulatory Disclosures as a Non-Participating Entity,
the rated entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of
its ratings process. Please refer to www.moodys.com
for the Regulatory Disclosures for each credit rating action under the
ratings tab on the issuer/entity page and for details of Moody's
Policy for Designating Non-Participating Rated Entities.
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.
Kaven Tsang
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
Franco Leung
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Chris Park
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
