TEXT-Fitch Rates Aoyuan's USD Notes Final 'B+'

Thu Jan 24, 2013 9:08pm EST

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(The following was released by the rating agency)

HONG KONG, January 24 (Fitch) Fitch Ratings has assigned China Aoyuan Property Group Limited's (Aoyuan, 'B+'/Stable) USD100m 13.875% notes due 2017 a final rating of 'B+'. The notes are issued as a tap to the USD125m notes due 2017 issued in November 2012, with the same terms and conditions.

The assignment of the final rating follows the receipt of documents conforming to information already received and the final rating is in line with the expected rating assigned on 21 January 2013.

Aoyuan's ratings are supported by its sufficient liquidity and robust sales performance in 2012. The ratings remain constrained by Aoyuan's limited geographical diversification and small business scale.

What could trigger a rating action? Negative: Future developments that may, individually or collectively, lead to negative rating action include:

- A significant decrease in 2013 contracted sales from 2012 level of CNY5bn, or contracted sales/ total debt falling below 1x on a sustainable basis (H112: 1.07x of LTM contracted sales/ total debt)

- EBITDA margin in 2013 declining to 15% (H112: 24%)

- Net debt/ adjusted net inventory rising towards 40% on a sustainable basis (H112: 10.3%)

- Deviation from the current fast churn-out and high cash flow turnover business model

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

-Successful execution of expansion strategy for the next two to three years, where business scale increases substantially, such that contracted sales increase to over CNY15bn per annum with improving profitability where EBITDA margin increases to over 25% on a sustained basis.

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