(The following statement was released by the rating agency)
Jan 18 - Fitch Ratings has assigned China-based Yuexiu Property Company Limited’s (YXP, ‘BBB-'/Stable) USD500m 4.5% notes due 2023 and its USD350m 3.25% notes due 2018 final ratings of ‘BBB-'.
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 11 January 2013.
The notes are rated at the same level as YXP’s ratings as they represent direct, unconditional, unsecured and unsubordinated obligations of the company.
YXP’s ratings benefit from a one-notch uplift from its moderately strong linkage with the state-owned Assets Supervision and Administration Commission (SASAC) of Guangzhou Municipal People’s Government. YXP is the largest Guangzhou SASAC-owned enterprise by total assets and has been closely involved in the municipality’s urban redevelopment projects.
YXP’s standalone credit profile of ‘BB+’ is supported by its strong track record in property development, adequate recurring EBITDA (CNY490m in 2011) and the additional financial flexibility provided by its 36%-owned Yuexiu REIT. YXP’s development of landmark property projects such as Guangzhou IFC has helped the company win similar projects in other major cities. The rating is constrained by a lack of scale to support YXP’s highly diversified business in terms of the number of projects and geographical market. The rating is also held back by its moderate leverage, as measured by net debt/net inventory, of above 0.4x.
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
- evidence of stronger linkage with the Guangzhou government
- recurring EBITDA/interest above 1.0x (0.41x in 2011) together with recurring EBITDA above CNY1bn
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- weakened linkage with the Guangzhou government
- weakened financial profile of its parent Guangzhou Yuexiu Holdings Limited leading to YXP having to provide support to its parent
- net debt/adjusted inventory (not including REIT assets) exceeding 0.45x
- deterioration in its recurring EBITDA/interest to below 0.5x