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Rating Action:

Moody's assigns first-time Ba3 rating to IFC

 The document has been translated in other languages

20 Nov 2012

Hong Kong, November 20, 2012 -- Moody's Investors Service has assigned a first-time Ba3 corporate family rating to International Financial Center Property Limited ("IFC"), a 100%-owned subsidiary of Beijing Capital Land Limited ("BJCL", Ba2 stable).

At the same time, Moody's has assigned a provisional (P) Ba3 senior unsecured rating to the proposed bonds to be issued by Central Plaza Development Limited ("CPD"), a wholly-owned subsidiary of BJCL, and guaranteed by IFC.

The ratings outlook is stable.

In addition to the guarantee from IFC, the proposed bonds will be supported by a Deed of Equity Interest Purchase Undertaking and a Keepwell Deed between BJCL, CPD, IFC and the bond trustee.

The Beijing Capital Group Ltd (unrated), the parent company of BJCL, will also provide a Letter of Support in favor of BJCL and IFC in connection with the proposed bond issuance.

All such arrangements intend to strengthen the support from BJCL for IFC, the guarantor of the proposed bonds.

There will also be 12 months of interest in reserve in an offshore escrow account.

The bond's provisional rating status will be removed after the completion of the bond issuance upon satisfactory terms and conditions.

The bond proceeds will be used to fund new acquisitions and project development.

RATINGS RATIONALE

"IFC's Ba3 corporate family rating reflects its B2 standalone credit profile and a two-notch rating uplift, based upon the expectation of high financial and operational support provided by BJCL," says Kaven Tsang, a Moody's Vice President and Senior Analyst.

"The two-notch uplift is based upon (i) BJCL's 100% ownership of IFC; (ii) a track record of financial support to IFC from BJCL; (iii) IFC's business direction being set by BJCL; and (iv) the fact that all IFC's projects are operated by BJCL, thereby offering cost efficiency and a strong brand name," adds Tsang.

BJCL is a medium-sized property developer, operating in 15 cities in China, and has accumulated a land bank of 11 million square meters (sqm). It has a track record of developing residential properties and is well supported by a seasoned management team and solid liquidity profile.

BJCL's state-owned background offers it strong opportunities to secure growth and funding support. It is 47% owned by the Beijing Capital Group which is a state-owned enterprise 100% owned by the Beijing Municipality and directly under the supervision of the State-Owned Assets Supervision and Administration Commission of the Beijing Municipality.

IFC's B2 standalone credit profile reflects its small scale operation, its thin capital base, which translates into credit metrics of debt/capitalization ratio around 65-75%, and modest EBITDA/interest of 2x-2.5x. These metrics position IFC in the single-B level.

Moody's has not notched the rating of the proposed bonds because the level of external project debt represented less than 15% of its total assets as of September 2012. This ratio is expected to remain below 15% over the next 1-2 years, as BJCL will also provide direct funding to IFC's project companies.

The stable rating outlook reflects Moody's expectation that IFC will continue to receive financial and operational support from BJCL.

Upward rating pressure on IFC could emerge if it can (1) successfully implement its business plan; (2) improve its scale and diversity to reduce sales and earnings volatility; (3) continue to access offshore funding; and (4) further improve its credit profile, especially its debt leverage.

Credit metrics which Moody's would consider for an upgrade for IFC include an improvement in its financial profile with its adjusted debt/capitalization assets falling to 50% - 55% and EBITDA/interest rising above 3x on a sustained basis.

IFC's rating could come under downward pressure if it (1) fails to substantially achieve its business targets, such that sales and operating cash flow generation are weaker than anticipated; and/or (2) materially accelerates development and executes an aggressive land acquisition plan, such that debt leverage rises, with adjusted debt/capitalization exceeding 65%-70%, and EBITDA/interest dropping below 1x-1.5x on a sustained basis.

Any evidence of a weakening in the support from BJCL to IFC, or a deterioration in BJCL's liquidity and/or credit profile could also be negative for the ratings.

The principal methodology used in rating IFC was the Global Homebuilding Industry Methodology, published in March 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Incorporated in the British Virgin Islands in 2000, International Financial Center Property Ltd. ("IFC") is the primary overseas holding company for Beijing Capital Land Ltd. ("BJCL", Ba2 stable). It is 100%-owned by BJCL. It is also the guarantor to the proposed bonds issued by Central Plaza Development Ltd.

As of September 2012, IFC had a total land bank of approximately 5.2 million sqm in saleable gross floor area ("GFA"), representing approximately 48% of the total land bank under the BJCL group. Total assets of IFC as of September 2012 were RMB20.4 billion.

Incorporated in China, BJCL is a mid-sized developer in China's residential property sector. As of June 30, 2012, BJCL had a total land bank of 11 million sqm (attributable land bank: 6.94 million sqm) in GFA, covering 15 cities in China. This land bank can support the company's development over the next four to five years.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Kaven Tsang
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
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077

Moody's assigns first-time Ba3 rating to IFC
No Related Data.
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