Nov 23 - Fitch Ratings has assigned Beijing Capital Land Ltd's (BCL, 'BB+'/Stable)
offshore CNY2bn 7.6% guaranteed bonds due 2015 a final 'BB+' rating. The notes, issued by
Central Plaza Development Limited (CPD), are jointly and severally guaranteed by BCL
The assignment of the final rating follows the receipt of documents conforming to
information already received. The final rating is in line with the expected rating assigned on
20 November 2012.
BCL's rating is enhanced by the land incubation strategy of its 47.2% parent Beijing Capital
Group (BCG) and capital support from China Development Bank (CDB) and Government of
Singapore Investment Corporation (GIC).
BCG provides BCL with land bank resources at a low cost, removing the need for BCL to
actively replenish its land bank. As of end-2011, BCL had a land bank of around 10 million sqm
gross floor area, including a portion sourced directly or indirectly from BCG. CDB has provided
over RMB20bn in long-term and short-term funding for BCL since 2003. GIC has a 8.1% interest in
BCL and also invested in 16 joint-venture projects with BCL in six cities as of end-2011.
What could trigger a rating action?
Negative: Future developments that may, individually or collectively, lead to negative
rating action include:
- Unfavourable changes to China's regulation or economy leading to a decline in contracted
sales or a decline in EBITDA margin below 15% (2011:21.2%) or deterioration in net debt/adjusted
inventory leverage above 35% (2011:30%) over a sustained period
- Any signs of BCL being unable to source cheap land bank from BCG , or weakening
relationship with CDB and GIC
Positive: An upgrade is unlikely in the short term, given the regulatory risks in the home
building industry in China. However, a successful execution of BCL expansion strategy for the
next three years with contracted sales exceeding RMB30bn-35bn, increasing recurring rental
income and improvement in net debt/adjusted inventory below 20%-25% on a sustained basis would
be positive for the ratings.