Hong Kong, July 26, 2019 -- 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 (Sino-Ocean, 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 mainly to refinance existing
debt.
RATINGS RATIONALE
"The proposed issuance will not have an immediate impact on Sino-Ocean's
Baa3 issuer rating or stable outlook, as the proceeds will be used
mainly to refinance existing debt," says Cedric Lai, a Moody's
Vice President and Senior Analyst.
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 housing demand is more stable. Its
good access to funding also supports 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.
Moody's expects Sino-Ocean's adjusted debt leverage - as
measured by revenue/adjusted debt - will recover to around 62%-72%
over the next 12-18 months from 45% in 2018, driven
by high revenue recognition and stable debt.
In addition, Moody's expects Sino-Ocean's EBIT/interest to
improve to 2.7x-3.1x over the next 12-18 months
from 2.5x in 2018.
The two notches of uplift reflect Moody's expectation that China Life
will extend strong support to Sino-Ocean, because of China
Life's track record of providing financial support to Sino-Ocean
and its strategic intentions to cooperate with Sino-Ocean.
This view also factors in China Life's strong ability to provide support
to Sino-Ocean, as illustrated by its A1 insurance financial
strength.
The stable ratings outlook reflects Moody's expectation that Sino-Ocean's
credit metrics will improve to levels supportive of its rating over the
next 12-18 months, and that the likelihood of support from
China Life will remain unchanged.
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 (1) EBIT/interest
above 4.25x; (2) adjusted revenue/debt above 90%-100%;
or (3) adjusted debt/capitalization below 40% on a sustained basis.
An upgrade of China Life's rating would not have an immediate impact
on Sino-Ocean's rating, without a material improvement
in its standalone credit profile.
On the other hand, downward rating pressure could emerge if the
company suffers a deterioration in its sales execution, gross profit
margin, debt leverage or liquidity position.
Credit metrics indicative of a potential downgrade include: (1)
EBIT/interest below 2.7x; (2) revenue/adjusted debt below
60%-65%; or (3) adjusted debt/capitalization
above 50% on a sustained basis.
The rating could also be downgraded without a decline in the company's
standalone credit quality if the likelihood of support from the parent
declines. This could result from any evidence of a reduction in
the ownership by or a weakening of the support from China Life,
or a deterioration in China Life's own credit profile.
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 a leading property developer
in China. The company focuses on developing mid- to high-end
residential properties, office premises and retail properties.
As of year-end 2018, the company had a land bank of about
40 million square meters (sqm) across 45 cities in China.
The Beijing-based company was listed on the Hong Kong Stock Exchange
in September 2007. China Life Insurance Co Ltd and Anbang Insurance
Group Co., Ltd. are its two largest shareholders,
with 29.59% and 29.58% equity stakes,
respectively, as of 31 December 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.
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Please see www.moodys.com for any updates on changes to
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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.
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88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
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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
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