RPT-Fitch Rates Beijing Capital Land's CNH Notes Final 'BB+'
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April 4 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned property developer Beijing Capital Land Ltd's (BCL; BB+/Negative) private placement of CNY1bn 5.75% guaranteed notes due 2017 a final 'BB+' rating, following the issuance of the notes denominated in offshore yuan, or CNH. The notes are issued under its USD1bn guaranteed medium-term note and perpetual securities programme and will be consolidated with the CNY2bn 5.75% guaranteed notes due 2017 issued on 17 February 2014 to form a single series.
The offshore yuan notes are issued by Central Plaza Development Ltd and are rated at the same level as BCL's senior unsecured rating because they will be irrevocably and unconditionally guaranteed by BCL's wholly owned subsidiary International Financial Center Property Ltd. Under the terms of the programme, BCL has granted a keepwell deed and deed of equity interest purchase undertaking for the offshore yuan notes.
The final rating is in line with the expected rating assigned on 30 March 2014.
KEY RATING DRIVERS
Leverage Moderated But Volatile: BCL's leverage, measured by the net debt/adjusted inventory ratio, moderated to 36% in 2013 from 47% in 2012, helped by a strong increase in development sales in the last two months of 2013. The sharp increase in investment property assets (a total of CNY3.5bn in 1H13 and 2012) reversed in 2H13 following asset disposals. BCL's intention to grow at a faster pace, which will require continued increase in land and construction expenditure, is likely to result in more volatile leverage. To achieve faster growth without increasing pressure on its credit metrics, BCL needs to sustain an improvement in contracted sales above the 2013 level of CNY19.6bn.
Contracted Sales Outlook Uncertain: Contracted sales in 2013 were volatile - they increased by only 14% yoy in January-October, but surged 160% yoy in November-December. Strong reliance on sales in Beijing and Tianjin (60% of total sales in 2013, 41% in 2012) could result in lumpy sales and reduced cash-flow visibility. Furthermore, sales uncertainty could increase with the tightening of home-purchase restrictions in Tier 1 cities and intense competition for land. However, Fitch believes that BCL's fast-churn mass-market business model targets the right market. Continuación...