Hong Kong, January 23, 2019 -- Moody's Investors Service has today downgraded Jiayuan International
Group Limited's corporate family rating (CFR) to Caa1 from B2.
At the same time, Moody's has downgraded the senior unsecured
rating of Jiayuan's USD notes to Caa2 from B3.
The outlook on all ratings is negative.
RATINGS RATIONALE
"The downgrade reflects our concerns that Jiayuan's access
to funding will be impaired because the recently sharp declines in the
company's share price and the risk of a change in management control
are likely to undermine investor confidence," says Kaven Tsang,
a Moody's Senior Vice President.
"These developments will increase refinancing risks for Jiayuan's
maturing debt, including the USD400 million of senior notes puttable
in October 2019, " adds Tsang.
Jiayuan's heightened near-term refinancing risks position
its CFR at Caa1, despite the fact that it had repaid the USD350
million of bonds due on 17 January.
Moody's notes that Mr. Shum Tin Ching, the chairman
and the largest shareholder, has pledged part of his shareholding
in the company for financing purposes. There was a forced sale
of part of these collateral shares during the sharp decline seen in the
share price on 17 January.
Moody's further notes that Mr. Shum held a 52.86%
equity interest in Jiayuan as of 22 January, after the forced sale
and the completion of an asset injection by Mr. Shum himself on
21 January.
However, the risks of the liquidation of the collateral shares held
by lenders and hence the triggering of a Change of Control clause of the
USD notes will remain in place if the share financing is not fully settled
and if Jiayuan's share price declines further.
The triggering of the Change of Control clause could accelerate the repayment
of the company's USD bonds and add pressure to its liquidity position.
Additionally, trading in the company's share has been suspended
since 22 January, and Moody's is concerned that its ability
to raise new funding to support its operations will weaken if the suspension
remains in place.
The Caa2 senior unsecured rating is one notch lower than the CFR due to
structural subordination risk.
This risk reflects the fact that the majority of claims are at the company's
operating subsidiaries. These claims have priority over Jiayuan'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 negative outlook reflects uncertainties over the company's abilities
to arrange funding on a timely basis to meet its near-term refinancing
needs.
Jiayuan's ratings could be further downgraded if its liquidity profile
weakens further or it defaults on its debt.
The ratings are unlikely to be upgraded, given the negative outlook.
However, the outlook could return to stable if 1) the share pledge
ratio of its largest shareholder declines significantly in a sustained
manner, 2) the company demonstrates an ability to refinance its
maturing debt; and 3) the company maintains its normal operations
with healthy operating cash flows.
The principal methodology used in these ratings 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.
Jiayuan International Group Limited develops mass-market residential
properties mainly in Jiangsu Province. The company expanded its
footprint to Shenzhen in 2016, Macau and New York in 2017,
and Guiyang, Shanghai, Hong Kong and Cambodia in the first
half of 2018. It also develops and operates commercial properties
alongside its residential property projects.
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
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
