Fitch: Modern Land China's Ratings Not Immediately Impacted by Executives' Exit

Fri Sep 5, 2014 2:09am EDT

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(The following statement was released by the rating agency) HONG KONG, September 05 (Fitch) Fitch says that Modern Land (China) Co., Limited's (Modern Land China; B/Stable) Long-Term Issuer Default Ratings (B/Stable) are not immediately affected by the resignation of Chief Executive Officer Mr. Zhong Tianxiang and Chief Financial Officer Mr. Fan Qingguo on 26 August 2014. The two executives have also been redesignated as non-executive directors. Fitch will continue to monitor developments at Modern Land China and may consider negative rating actions if the company's operational and financial performance is negatively impacted by the change in leadership. The ratings are underpinned by Modern Land China's credit metrics, which are within thresholds at which Fitch may consider negative rating action. Modern Land China's 1H14 results are in line with Fitch's expectations. Modern Land China's contracted sales grew 36% y-o-y to CNY2.28bn in 1H14 and its gross profit margin was stable at 45.9% compared with 43.5% a year earlier. Modern Land China's net debt to adjusted inventory rose to 38% at end-1H14 from a net cash position at end-2013 as the company acquired land to increase its business scale. Fitch expects the credit metrics to improve in 2H14, driven by a larger number of sales launches and lower land premium payments. The company's unrestricted cash balance of CNY1.9bn (USD309m) at end-June 2014 and the USD125m raised from senior notes issued on July 2014 provide liquidity for it to repay short-term borrowings of CNY0.9bn and outstanding land premium of CNY700m as at end-June 2014. Modern Land China's President and Executive Director Mr. Zhang Peng, who was appointed to this post in January 2014, will assume the day-to-day responsibilities of the chief executive. Mr. Wang Qiang, who was appointed Director of Financial Centre of Modern Land China on December 2013 and Vice President in August 2014, will take over the responsibilities of the CFO. Both Mr. Zhang and Mr. Wang have more than 10 years' experience working in Modern Land China and have been actively involved in the company's strategic and financial matters since their respective appointments earlier this year. The company's 1H14 results show that the company's strategic direction and operations have remained intact since their appointments early this year. Contact: Primary Analyst Michelle Leong Associate Director +852 2263 9929 Fitch (Hong Kong) Limited 28th Floor, Two Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Andy Chang Associate Director +852 2263 9914 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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