Hong Kong, September 14, 2018 -- Moody's has downgraded to B3 from B2 the corporate family rating
(CFR) of Yida China Holdings Limited.
At the same time, Moody's has downgraded to Caa1 from B3 the
senior unsecured rating of the senior unsecured notes issued by the company.
The rating outlook remains negative.
RATINGS RATIONALE
"The rating downgrade reflects Yida's weak financial management
and its heightened debt refinancing risk over the next 12-18 months
amid tight credit conditions in China for small scale property developers,"
says Kaven Tsang, a Moody's Vice President and Senior Credit Officer.
As of June 2018, Yida had cash of RMB2.0 billion (including
RMB525 million unrestricted and RMB1.44 billion restricted),
which could not fully cover its short-term debt of RMB9.7
billion and the RMB3.2 billion balance payment for the acquisition
of the remaining interest in the Dalian Tiandi project, which generated
good presales for the company in 1H 2018.
Moody's notes that the company will receive RMB2.6 billion
of cash in 2H 2018 from the sale of a land parcel within the Dalian Tiandi
project to Longfor Group Holdings Limited (Baa3 stable) and manage to
refinance its trust loans and onshore bonds due in 3Q 2018. However,
the funding gap for the next 12 months is still estimated at RMB6-6.5
billion.
Yida's net operating cash flow from contracted sales of residential
properties is inadequate to fully cover this funding gap. In the
first eight months of 2018, Yida's gross contracted sales increased
24% year-on-year to RMB5.6 billion,
partially driven by 13% year-on-year growth in average
contracted sales prices and new launches in 2Q 2018. Moody's
expects the company's gross contracted sales to stay largely flat at around
RMB7 billion for the full year 2018, compared with RMB7.26
billion in 2017.
Yida is actively seeking new borrowings to cover the funding gap.
If the company fails to secure new financing in the next few months,
its ratings will come under further downgrade pressure.
In addition, Yida's borrowings cost will increase under the
tight credit environment in China (A1 stable), which will in turn
weaken its financial metrics. Moody's expects Yida's EBIT/adjusted
interest will stay weak at 1.3x-1.4x over the next
12 months, declining from 1.7x in 2017. Its revenue/adjusted
debt will also decline slightly to around 33%-34%
from 40% in 2017. These levels place the company's
rating at the lower B level.
Yida's B3 CFR reflects the company's established track record
in the development and management of business parks in Dalian.
Its rental and management income from business parks will provide the
company with stable cash flow, which is a key driver for its B3
rating.
Moody's expects Yida's rental income will grow to RMB410-430
million in 2018-19 from RMB386 million in 2017. This stable
income covers around 25% of the company's gross interest
expenses and can offer some support to the company's debt service
capability.
However, the company's B3 CFR is constrained by its weak liquidity,
high debt leverage, small operating scale, and high geographic
concentration in Dalian city.
The negative outlook reflects Moody's concerns over Yida's weak
liquidity and high debt refinancing risk.
Upward rating pressure is unlikely, given the negative outlook.
Nevertheless, the rating outlook could return to stable if Yida
(1) improves its liquidity position by refinancing its maturing debt with
longer term debt, such that cash/short-term debt can be sustained
at 1.0x; (2) shows growth in contracted sales with acceptable
levels of cash collection; and (3) maintains its EBIT/interest above
1.0x.
On the other hand, downward rating pressure could arise if Yida's
liquidity position further deteriorates due to (1) a material decline
in contracted sales; or (2) an inability to refinance its maturing
debt over the next 6-12 months.
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.
Yida China Holdings Limited engages in the development and operation of
business parks, and the development and sale of residential properties,
with a focus on Dalian. The company also provides property management
and construction, decoration and landscaping services. Yida
was founded in 1998 by Sun Yinhuan, the ex-chairman of the
company. The company listed on the Hong Kong Stock Exchange in
June 2014.
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
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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
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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
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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.
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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.
Kaven Tsang
VP - Senior Credit Officer
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
