RPT-Fitch Rates Nan Fung's Proposed USD Notes 'BBB(EXP)'
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May 22 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Hong Kong-based Nan Fung International Holdings Limited's (Nan Fung; BBB/Stable) proposed US dollar notes an expected rating of 'BBB(EXP)'. The proposed notes will be issued by Nan Fung Treasury Limited, a wholly owned subsidiary of Nan Fung. The notes are unconditionally and irrevocably guaranteed by Nan Fung.
The bonds are rated at the same level as Nan Fung's Issuer Default Rating as they represent direct, unconditional, unsecured and unsubordinated obligations of the company. The final rating is contingent on the receipt of final documents conforming to information already received.
KEY RATING DRIVERS
Established Market Position: Nan Fung has 49 years of experience in developing residential and commercial properties in Hong Kong. The company has demonstrated the ability to come through economic cycles, aided by its strong capital structure that allows operational flexibility in terms of the timing of investments. Nan Fung's prudence is reflected in its highly liquid financial profile, low financial leverage and investment property portfolio that has been funded mainly via internally generated funds.
Sufficient Interest Coverage: Nan Fung's stable recurring income streams are generated from its investments in investment property, financial investments and hotel operations. Fitch expects these segments to generate HKD1.4bn-1.6bn in recurring EBITDA per annum over the next three years. The company's recurring income interest coverage is expected to stay above 2.5x (2.39x at end-March 2013), which still supports its rating level.
Smaller Operating Scale: Nan Fung's investment property portfolio is small, in terms of absolute asset size as well as percentage contribution to income, compared with its higher-rated property peers. This weakness constrains its rating. Its property portfolio amounted to 2.5 million square feet in Hong Kong and 1.3 million square feet in China at 31 March 2013 (2.02 million square feet in total at 31 March 2012). Continuación...