Hong Kong, July 23, 2018 -- Moody's Investors Service has assigned a Baa3 rating to the proposed
senior unsecured notes to be issued by Sino-Ocean Land Treasure
IV Limited, a wholly-owned subsidiary of Sino-Ocean
Group Holding Limited (Baa3 stable), based on the irrevocable and
unconditional guarantee of Sino-Ocean Group Holding Limited.
The rating outlook is stable.
The company plans to use the bond proceeds primarily to repay its existing
debt.
RATINGS RATIONALE
"The proposed issuance of the senior unsecured notes will not have an
immediate impact on Sino-Ocean Group Holding Limited's Baa3
issuer rating or stable outlook, as the proceeds will be mainly
used to refinance existing debt," says Franco Leung,
a Moody's Senior Vice President.
The bond proceeds will also strengthen Sino-Ocean's liquidity which
is currently adequate.
Moody's expects Sino-Ocean's adjusted debt leverage --
as measured by revenue/adjusted debt -- will remain at around
70% over the next 12-18 months, compared with 70%
in 2017 and 74% in 2016.
In addition, Moody's expects Sino-Ocean's EBIT/interest will
trend towards 3.2x from around 4.0x in 2017.
Sino-Ocean's Baa3 issuer rating reflects its standalone credit
strength and a two-notch uplift, based on Moody's expectation
that the company will receive strong support from China Life Insurance
Co Ltd (China Life, insurance financial strength A1 stable) —
its largest shareholder — in the event of financial distress.
Sino-Ocean's standalone rating reflects its long operating history
in the property sector since 1993 and its focus on operating in high-tier
Chinese cities, where demand generally remains robust. Its
good access to funding also support its long-term development.
In addition, its diversified products and the increasing recurring
revenue contribution from its investment property portfolio will offer
stability to its operating performance.
On the other hand, the standalone rating is constrained by its moderate
financial metrics.
The two notches of uplift reflect Moody's expectation that China Life
will extend strong support to Sino-Ocean, because:
(1) China Life has a track record of providing financial support to Sino-Ocean;
(2) Sino-Ocean is China Life's sole strategic equity investment
in the real estate sector; and (3) China Life is expected to increase
its real estate development cooperation with Sino-Ocean,
leveraging its design, operations and market knowledge.
The stable ratings outlook reflects Moody's expectation that Sino-Ocean's
improved credit metrics will be sustained over the next 12-18 months.
Upward pressure on Sino-Ocean's issuer rating could emerge if the
company grows its scale through stable sales growth, while maintaining
a strong liquidity position, prudent financial management,
and disciplined land acquisitions.
Credit metrics indicative of upward rating pressure include EBIT/interest
above 4.25x and adjusted revenue/debt above 90%-100%,
or adjusted debt/capitalization below 40% on a sustained basis.
On the other hand, downward rating pressure could emerge if the
company shows a deterioration in its sales execution, gross profit
margins, debt leverage, or liquidity position.
Credit metrics indicative of downgrade pressure include: (1) EBIT/interest
below 2.7x; (2) revenue/adjusted debt below 60%-65%;
or (3) adjusted debt/capitalization rises above 50% on a sustained
basis.
Any evidence of a reduction in ownership by or weakening in the support
from China Life, or a deterioration in China Life's own credit profile,
could also be negative for Sino-Ocean's issuer rating.
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.
Sino-Ocean Group Holding Limited is one of the major property developers
in China with more than 130 projects in various stages of development
across 33 cities. It focuses on developing mid- to high-end
residential properties, office premises, and retail properties.
The Beijing-based company listed on the Hong Kong Stock Exchange
in September 2007. China Life Insurance Co Ltd is its largest shareholder,
with a 29.79% stake as at year-end 2017.
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.
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.
Franco Leung
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