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TEXT-S&P Rates Central China Real Estate's Proposed Notes 'B+'
January 21, 2013 / 6:11 AM / in 5 years

TEXT-S&P Rates Central China Real Estate's Proposed Notes 'B+'

(The following was released by the rating agency)

HONG KONG (Standard & Poor‘s) Jan. 21, 2013--Standard & Poor’s Ratings Services today assigned its ‘B+’ long-term issue rating and ‘cnBB’ long-term Greater China regional scale rating to a proposed issue of U.S. dollar-denominated senior unsecured notes by Central China Real Estate Ltd. (CCRE: BB-/Stable/--; cnBB+/--).

The issue rating is one notch lower than the corporate credit rating on CCRE to reflect our opinion that offshore noteholders would be materially disadvantaged, compared with onshore creditors, in the event of default. We anticipate that the company’s ratio of priority borrowings to total assets will remain above our notching threshold of 15% for companies with a speculative-grade rating.

CCRE intends to use the proceeds to fund new and existing property projects (including land premium), repay existing debt, and for general corporate purposes. The rating is subject to our review of the final issuance documentation.

The rating on CCRE reflects the company’s limited geographic diversity and growing competition in Henan province. CCRE’s good sales execution, focused strategy and good market position in Henan, and sizable low-cost land reserves moderate these weaknesses. We assess the company’s business risk profile as “weak” and its financial risk profile as “aggressive.”

The stable rating outlook on CCRE reflects our expectation that the company will generate satisfactory property sales and have good financial flexibility to meet its short-term obligations. We anticipate that the company will maintain a debt-to-EBITDA ratio of 3x-4x in 2013 and have at least Chinese renminbi 1 billion in unrestricted cash annually while pursuing its high-growth strategy.

RELATED CRITERIA AND RESEARCH

-- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011

-- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008

-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

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