(The following was released by the rating agency)
SINGAPORE/HONG KONG, September 17 (Fitch) Fitch Ratings has assigned Nan Fung Treasury Limited’s USD300m notes 4.5% notes due 2022 a final ‘BBB’ rating. The notes are unconditionally and irrevocably guaranteed by Nan Fung International Holdings Limited (Nan Fung, ‘BBB’/Stable), a Hong Kong property developer.
The assignment of the final rating follows the receipt of documents conforming to information already received. The final rating is in line with the expected rating assigned on 14 September 2012.
Nan Fung’s ratings reflect its established brand name, and strong liquidity and financial profile. It has over 45 years of experience in high-end residential and commercial real estate development in Hong Kong.
For its financial year to March 2012, Nan Fung remained in net cash position and maintained strong liquidity; it had cash of HKD11.9bn against short-term bank borrowings of HKD2.3bn. Its liquid financial investment portfolio of HKD19.6bn and unutilised committed banking facilities of around HKD7bn provide additional financial flexibility.
What could trigger a rating action?
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
- the investment property division contributing a substantial portion of the company’s asset and EBITDA
- financial assets portfolio and cash levels remaining above total debt levels
- investment property EBITDA (rental and management fees) to gross interest expenses (including capitalised interests) above 2x on a sustained basis (FY12:2.1x)
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- poor execution of Nan Fung’s property development projects on a sustained basis
- significant weakness in both the Hong Kong and Chinese property markets leading to substantial decline in property prices
- recurring EBITDA (investment property, dividend and coupon from the investment portfolio) to gross interest expense (including capitalised interests) below 2x on a sustained basis (FY12: 10.7x).