Hong Kong, August 21, 2019 -- Moody's Investors Service has assigned a Ba3 backed senior unsecured
debt rating to the proposed USD senior notes to be issued by Yanlord Land
(HK) Co., Limited and irrevocably and unconditionally guaranteed
by Yanlord Land Group Limited (Yanlord, Ba2 stable).
Yanlord plans to use the proceeds of the new USD notes for project development
and acquisition, and general corporate purposes.
RATINGS RATIONALE
"The proposed bond will have a limited impact on Yanlord's credit metrics,"
says Cedric Lai, a Moody's Vice President and Senior Analyst.
The proposed issuance will not substantially change Moody's expectations
of Yanlord's financial metrics over the next 12-18 months,
as the total bond issuance will likely be within Moody's forecast of new
debt raised by the company in 2019 for capital expenditure and general
corporate funding.
Moody's expects that Yanlord's adjusted EBIT/interest will trend towards
4.5x-5.0x over the next 12-18 months from
3.8x in the twelve months to end June 2019, and its debt
leverage — as measured by revenue/adjusted debt — gradually
towards 60% from 33% over the same period.
Moreover, Moody's expects Yanlord will grow its total pre-sale
by 50%-60% year-on-year to RMB39-RMB42
billion in 2019, supported by its established market position in
its core Yangtze River Delta market. Yanlord's accumulated contracted
pre-sales and subscription sales reached RMB20.7 billion
in the first half of 2019, up 78% year-on-year.
Yanlord's Ba2 corporate family rating reflects the company's established
brand name and high-quality products, which provide it with
strong pricing power and support its above-peer-average
gross margin. In addition, the company's sales execution
strategy, aimed at catering to a broader spectrum of market demand,
helps reduce the negative impact from regulatory measures that constrain
property demand.
The rating also takes into consideration Yanlord's strong liquidity profile,
and ability to access onshore and offshore funding.
Meanwhile, the rating is constrained by the company's (1) geographic
concentration, (2) higher leverage, because of its large-scale
land acquisitions, and (3) exposure to tightening regulatory measures.
The company's Ba3 senior unsecured debt rating is one notch lower
than the corporate family rating, due to structural subordination
risk. This risk reflects the fact that the majority of claims are
at the operating subsidiaries and have priority over Yanlord'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 rating outlook reflects Moody's expectation that over
the next 12 months, Yanlord will maintain a disciplined approach
to land acquisitions, moderate growth in scale, stable financial
metrics and a strong liquidity position.
Yanlord's liquidity position is good. Moody's expects that
the company's cash holdings and cash flow from operating activities
will be sufficient to cover its maturing debt and committed land payments
over the next 12 months. At 30 June 2019, Yanlord held a
cash balance of RMB17.7 billion, which covered about 141%
of its short-term debt of RMB12.5 billion as of the same
date.
Upward rating pressure could develop if Yanlord increases its scale,
while maintaining (1) a strong liquidity position; and (2) sound
credit metrics, with adjusted revenue/debt above 100% and
EBIT/interest coverage above 4.5x-5.0x on a sustained
basis.
However, downgrade rating pressure could emerge if Yanlord's contracted
sales fall and credit metrics weaken, with EBIT/interest coverage
falling below 3.5x or adjusted revenue/debt falling below 70%-75%
on a sustained basis.
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.
Yanlord Land Group Limited is a major property developer in China.
The company operates in the major Chinese cities of Shanghai, Nanjing,
Suzhou, Hangzhou, Nantong, Shenzhen, Tianjin,
Zhuhai, Chengdu, Tangshan, Jinan, Zhongshan,
Haikou, Sanya and Wuhan.
Yanlord Land Group Limited listed on the Singapore Stock Exchange in 2006.
The company had a total land bank of 8.54 million square meters
by gross floor area at 30 June 2019.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
Cedric Lai
Vice President - Senior 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
