Hong Kong, July 15, 2019 -- Moody's Investors Service has today placed on review for downgrade
the Ba2 corporate family rating (CFR) and Ba3 senior unsecured rating
of Future Land Development Holdings Limited, as well as the Ba2
CFR of its key operating subsidiary, Seazen Holdings Co.,
Ltd.
At the same time, Moody's has placed on review for downgrade
the Ba2 backed senior unsecured rating on the bonds issued by New Metro
Global Limited and guaranteed by Seazen.
All outlooks are changed to rating under review from stable.
RATINGS RATIONALE
"The review for downgrade reflects our concerns over the potential negative
impact on Future Land Development and Seazen's reputation,
operations and funding access, following the confirmation of the
arrest of Mr. Wang Zhenhua, the two companies' largest
shareholder and former chairman," says Kaven Tsang, a Moody's
Senior Vice President.
On 10 July, Future Land Development confirmed that Mr. Wang
Zhenzhou had been arrested by the Shanghai Putuo District Procuratorate
and Public Security Bureau.
Since the criminal custody of Mr. Wang Zhenhua, the share
price for both Future Land Development and Seazen has dropped by about
26% and 30%, respectively, over the past week,
despite recent stabilization. Given that Future Land Development
has pledged around half of its 67.1% stake in Seazen for
financing, its liquidity could deteriorate if Seazen's share
price falls substantially.
In addition, Future Land Development's liquidity has been
supported by its strong contracted sales growth over the past 2-3
years, and any material slowdown could require it to source alternative
funding to maintain its liquidity.
Moody's review will focus on the impact of the arrest on the companies'
operations, including the sale and development of property projects,
any potential change of control, funding access and cost of funding,
and the overall impact on the two companies' liquidity and financial
profile.
In terms of environmental, social and governance (ESG) factors,
Moody's has also taken into account the concentrated ownership by Future
Land Development's key shareholder, Mr. Wang Zhenhua,
who held a total 71% stake in the company as of 15 July 2019.
This risk of concentrated ownership is incorporated in the Ba2 CFR and
is partly mitigated by: (1) the presence of three independent non-executive
directors on the board, who also chair the audit, nomination
and remuneration committees; (2) the company's moderate 20%-25%
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 Hong Kong
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.
Seazen Holdings Co., Ltd. engages primarily in residential
development and was founded in 1993 by Mr. Wang Zhenhua.
Seazen is a 67.1%-owned subsidiary of Future Land
Development Holdings Limited, accounting for most of Future Land
Development's operations.
Future Land Development was founded by Mr. Wang in 1996.
At the end of 2018, the Future Land Group had a land bank spread
across 77 cities in China, with a total gross floor area of around
110 million square meters.
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