(The following was released by the rating agency)
HONG KONG (Standard & Poor‘s) Jan. 7, 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 seven-year U.S. dollar-denominated senior unsecured notes by Shimao Property Holdings Ltd. (BB-/Stable/--; cnBB+/--).
The ratings are subject to our review of the final issuance documentation. The issue rating is one notch lower than the long-term corporate credit rating on Shimao 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 debt to total assets will continue to be above our threshold of 15% for speculative-grade companies. Shimao will use the proceeds from the proposed issuance to refinance existing debt, finance existing and new property development projects, and for general corporate purposes.
The issuer rating on Shimao reflects the company’s aggressive appetite for expansion and high leverage compared with peers we rate in the ‘BB’ category. Shimao’s established market position, geographic and project diversity, improved sales and project execution, and low land costs temper these weaknesses.
We assess the company’s business risk profile as “fair” and its financial risk profile as “aggressive.” The stable outlook reflects our expectation that Shimao’s property sales will remain healthy over the next 12 months.
We also anticipate that the company’s capital structure will improve and stabilize at a level appropriate for the ‘BB-’ rating. Satisfactory property sales and some control over debt could cause the improvement. We expect Shimao to maintain adequate liquidity while pursuing growth.