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Rating Action:

Moody's reviews ratings of Beijing Capital Group and subsidiaries for downgrade

 The document has been translated in other languages

29 Feb 2016

Hong Kong, February 29, 2016 -- Moody's Investors Service has placed the following ratings of Beijing Capital Group Co., Ltd. and its subsidiaries on review for downgrade.

1. The Baa2 issuer rating of Beijing Capital Group Co., Ltd. (Capital Group);

2. The Baa2 backed senior unsecured rating to the bonds issued by Beijing Capital Polaris Investment Co. Ltd. and guaranteed by Capital Group;

3. The Ba2 corporate family rating of Beijing Capital Land Limited;

4. The Ba3 corporate family rating of International Financial Center Property Ltd. (IFC);

5. The Ba3 backed senior unsecured debt rating to the bonds issued by Central Plaza Development Ltd. (CPD); and

6. The provisional (P)Ba3 backed senior unsecured rating of the Medium Term Note (MTN) program of CPD.

Both the bonds and MTN program of CPD are guaranteed by IFC.

They are also supported by Deeds of Equity Interest Purchase Undertaking and Keepwell Deeds between Beijing Capital Land Limited, CPD, IFC and the bond trustee. Both CPD and IFC are wholly-owned subsidiaries of Beijing Capital Land Limited.

Additionally, Capital Group, the parent of Beijing Capital Land Limited, provides Letters of Support in favor of Beijing Capital Land Limited and IFC in connection with both the bonds and the MTN program.

RATINGS RATIONALE

"The review for downgrade of Capital Group is driven by our concerns over the company's ability to reduce its high debt leverage, as planned, in light of the weakening economic environment in China," says Kaven Tsang, a Moody's Vice President and Senior Credit Officer, and also the Lead Analyst of Capital Group.

Capital Group's high debt leverage is primarily a result of the fast debt-funded expansion of its property and water services businesses in 2015, and the slower-than-expected progress in asset disposals.

Moody's estimates that Capital Group's adjusted net debt/EBITDA had kept around 10x at end-2015, a level inconsistent with its baseline credit assessment of ba2.

Capital Group's Baa2 issuer rating also incorporates a three-notch uplift due to our expectation of a high level of financial support from the Beijing Municipal Government (unrated) in times of stress.

The Ba2 rating of Beijing Capital Land Limited is also on review for downgrade due to its persistently high level of debt leverage and the weakened credit profile of Capital Group, its parent.

Beijing Capital Land Limited's rating reflects its standalone credit strength and a two-notch rating uplift, based on expected strong financial and operating support from Capital Group.

Moody's notes that Beijing Capital Land Limited has repositioned its business to first-tier and major second-tier cities, and achieved a strong 31% growth in contracted sales to RMB32.5 billion in 2015.

However, the company has experienced falling profit margins which have, in turn, weakened its credit metrics.

Beijing Capital Land Limited's debt leverage -- measured by revenue/debt -- was 19.7% as of 30 June 2015 and interest coverage was 1.2x, weak for its standalone credit strength. Moody's expects these metrics will likely to stay weak at end-2015.

Moody's will focus its review on (1) Capital Group's and Beijing Capital Land Limited's business strategies and financial policies in managing their growth plans in a challenging operating environment; (2) the companies' plan to reduce debt leverage; (3) the companies' 2015 results and their financial profiles over the next 12-18 months; and (4) Capital Group's ability to provide financial support to Beijing Capital Land Limited.

IFC's Ba3 corporate family rating is put on review for downgrade due to the weakened credit profile of Beijing Capital Land Limited.

The principal methodology used in rating Beijing Capital Group Co., Ltd. was Homebuilding And Property Development Industry published in April 2015. Other methodologies used include the Government-Related Issuers methodology published in October 2014. The principal methodology used in rating Beijing Capital Land Limited, Beijing Capital Polaris Investment Co., Ltd., Central Plaza Development Ltd., and International Financial Center Property Ltd. was Homebuilding And Property Development Industry published in April 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.

Incorporated in the British Virgin Islands in 2000, International Financial Center Property Ltd (IFC) is a 100%-owned subsidiary of Beijing Capital Land Limited. IFC is an overseas investment holding company that owns property development projects in China.

Beijing Capital Land Limited was incorporated in China in 2002 and is the property arm of Beijing Capital Group Ltd (Capital Group). Beijing Capital Land Limited listed on the Stock Exchange of Hong Kong in 2003. Capital Group is Beijing Capital Land Limited's largest shareholder with an equity interest of 54.5%. GIC, Singapore's sovereign wealth fund, is also a major shareholder with a 5.5% stake.

Founded in 1994, Capital Group is 100% owned by the Beijing Municipal Government and is under the direct supervision of the State-Owned Assets Supervision and Administration Commission of the Beijing Municipality. It has four major business segments: (1) environmental protection; (2) infrastructure; (3) real estate; and (4) financial services.

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.

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
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
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 reviews ratings of Beijing Capital Group and subsidiaries for downgrade
No Related Data.
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