Hong Kong, October 28, 2019 -- Moody's Investors Service ("Moody's") has placed on review for downgrade
the Ba2 corporate family rating (CFR) of Yanlord Land Group Limited (Yanlord).
In addition, Moody's has placed on review for downgrade the Ba3
backed senior unsecured rating on the bonds issued by Yanlord Land (HK)
Co., Limited, a wholly-owned subsidiary of Yanlord
and guaranteed by Yanlord.
All outlooks are changed to rating under review from stable.
RATINGS RATIONALE
"The review for downgrade reflects our concerns that Yanlord's credit
metrics could significantly weaken following its proposed acquisition
of United Engineers Limited (UEL)," says Cedric Lai, a Moody's
Vice President and Senior Analyst.
On 25 October 2019, Yanlord announced that it has through its wholly-owned
subsidiary acquired the remaining 51% stake in Yanlord Investment
(Singapore) Pte. Ltd. (YIS) from Perennial UW Pte.
Ltd. and Heng Yue Holdings Limited. Prior to the acquisition,
Yanlord owned an indirect interest of 49% stake in YIS.
The acquisition will trigger a mandatory general offer for UEL,
in which YIS currently holds a 35.27% stake. The
exact amount of shares in UEL that Yanlord can acquire will remain uncertain
until the completion of the deal.
United Engineers Limited is listed on the Singapore Stock Exchange,
and specializes in property rental and hospitality, property development,
engineering, distribution, manufacturing, and corporate
services & others. It operates across Singapore, Malaysia,
China, and USA.
Moody's estimates that Yanlord's debt leverage — as
measured by revenue/adjusted debt — would materially weaken over
the next 12-18 months from 54% in 2018, if Yanlord
substantially increases its stake in UEL via the general offer --
given that the acquisition would be substantially debt-funded and
Yanlord would assume all or substantial parts of UEL's liabilities.
Moody's review will focus on assessing the impact of the acquisition on
the company's credit metrics and liquidity upon further clarity
on (1) the outcome of the mandatory general offer and (2) the final financing
structure of the transaction, including the amount of debt raised
for the acquisition.
In terms of environmental, social and governance (ESG) factors,
Moody's has taken into account the concentrated ownership by Yanlord's
key shareholder, Mr. Zhong Sheng Jian, who held an
approximate 70.11% stake (direct and indirect) in Yanlord
as of 13 March 2019.
Moody's has also considered (1) the presence of four independent
non-executive directors on Yanlord's eight-member
board of directors, who also chair the audit, nominating,
remuneration and risk management committees; (2) the company's moderate
15%-20% dividend payout ratio over the past three
years; and (3) the presence of other internal governance structures
and standards, as required under the Corporate Governance Code for
companies listed on the Singapore Stock Exchange.
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.
Yanlord Land Group Limited is a major property developer in China.
The company operates across major Chinese cities including: Shanghai,
Nanjing, Suzhou, Hangzhou, Nantong, Shenzhen,
Tianjin, Zhuhai, Chengdu, Tangshan, Jinan,
Zhongshan, Haikou, Sanya and Wuhan.
Yanlord Land Group Limited listed on the Singapore Stock Exchange in 2006.
The company had a total land bank of 8.54 million square meters
by gross floor area at 30 June 2019.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 entities are participating and the rated entities or their agent(s)
generally provide 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.
Cedric Lai
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
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