TEXT-S&P Rates COLI's Senior Unsecured Notes 'BBB'

Tue Nov 6, 2012 9:46pm EST

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(The following was released by the rating agency)

HONG KONG (Standard & Poor's) Nov. 7, 2012--Standard & Poor's Ratings Services today assigned its 'BBB' issue rating and its 'cnA' Greater China regional scale rating to a proposed issue of U.S.-dollar denominated senior unsecured notes unconditionally and irrevocably guaranteed by China Overseas Land & Investment Ltd. (COLI: BBB/Stable/--; cnA/--).

China Overseas Finance (Cayman) V Ltd. will issue the proposed Reg S issue of notes in two tranches. We expect the terms and conditions of the proposed notes to be on par with those of COLI's existing U.S. dollar senior unsecured notes.

The issue rating is subject to our review of the final issuance documentation. We expect COLI to use the proceeds to repay or refinance existing debt, to finance new and existing projects, and for general corporate purposes.

The corporate credit rating on COLI reflects the company's leading market position, good geographic diversification, and "intermediate" financial risk profile. The rating also reflects COLI's consistently solid operating performances since 2005 and the company's track record of proactive financial management through property cycles and strong financial flexibility.

COLI's lack of recurring income and its exposure to the cyclical nature of the Chinese real estate market with high regulatory risks partly offset the above strengths. The stable outlook reflects our expectation that COLI will expand in a controlled manner and maintain profit growth at about 20% annually for the next three years.

We believe the company will maintain its proactive financial management and strong execution capability in China. In our view, COLI will mostly fund any accelerated growth through property sales rather than debt. We believe gross debt would increase, however, in line with profit and cash flow growth.

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