(The following was released by the rating agency)
HONG KONG, November 20 (Fitch) Fitch Ratings has published
China-based Beijing Capital Land Ltd's (BCL) Long-Term Foreign-
and Local-Currency Issuer Default Ratings (IDRs) of 'BB+'
respectively. The Outlook is Stable.
The agency has also published BCL's local-currency senior
unsecured rating of 'BB+' and its proposed offshore CNY
unsubordinated unsecured notes' 'BB+(EXP)' rating. The notes, to
be issued by Central Plaza Development Limited (CPD), are to be
jointly and severally guaranteed by the subsidiary guarantors.
The final ratings are contingent upon the receipt of final
documents conforming to information already received.
BCL maintains a company profile consistent with a 'BB'
profile but is supported at the 'BB+' rating level by the land
incubation strategy from its parent Beijing Capital Group (BCG)
and long-term stable strategic alliances with China Development
Bank (CDB) and Government of Singapore Investment Corporation
(GIC), which provided long term funding to BCL since 2003.
BCL's ratings reflect its benefit from parent BCG, which
owns 47.2% of BCL. The incubation land strategy at BCG provides
land bank resources for BCL at a low cost. As a result, BCL does
not have an active need to replenish its land bank. As of Dec
2011, BCL had a land bank of around 10m sqm gross floor area,
including a portion sourced directly or indirectly from BCG.
BCL's ratings are also supported by CDB and GIC. CDB has
provided over RMB20bn long-term and short-term funding for BCL
since 2003. GIC has 8.1% shareholdings of BCL and also invested
in 16 joint-venture projects with BCL in six cities at Dec 2011.
BCL has diversified multiple funding channels particularly
in debt, such as strong support from domestic banks for bank
loans and construction loans, project level joint venture with
GIC and access to both onshore and offshore capital markets. At
end-2011 BCL had RMB8.35bn in cash (RMB0.38bn restricted cash),
with RMB40.8bn unused bank credit facilities at June 2012.
BCL's ratings are constrained by its small scale with
contracted sales of RMB11bn in 2011 and a small land bank of 10m
sqm. However, BCL has achieved moderate diversification over the
years and has 35 projects covering 14 cities across China. Since
1993, BCL has developed 57 projects with the developed area
exceeding 16m sqm, covering various property types including
residential, office, commercial, hotel and land development
The Stable Outlook reflects Fitch's expectation that BCL
will achieve stronger contracted sales in H212 compared with
H112. Fitch expects the company to deliver a slight increase of
contracted sales for 2012 with more project launches, and
continue to focus on meeting its contracted sales target which
should lead to stable cash flows and liquidity for 2012.
What could trigger a rating action?
Positive: Future developments that may, individually or
collectively, lead to positive rating action include:
- An upgrade is unlikely in the short term, given the
regulatory risks in the home building industry in China.
- A successful execution of BCL expansion strategy for next
three years with contracted sales exceeding RMB30bn-35bn, rise
in recurring rental income and improvement in net debt/adj
inventory to below 20-25% on a sustained basis would be positive
factors for the ratings.
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 to below 15% or deterioration in net debt/adj inventory
leverage to above 35% over a sustained period.
- Any signs of BCL being unable to source a cheap land bank
from its parent BCG , and/or weakening relationships with BCL's
strategic partners such as CDB and GIC, would put negative
pressure on the ratings.