January 5, 2018 / 4:25 AM / 14 days ago

Fitch: Guangzhou R&F's Bond Rating Unaffected by Tap Issuance

(The following statement was released by the rating agency) HONG KONG, January 04 (Fitch) Fitch Ratings says Guangzhou R&F Properties Co. Ltd.'s (BB/Rating Watch Negative) proposed issuance of an additional USD100 million of its USD500 million 5.875% senior notes due 2023 will not affect the 'BB' rating on the bond. The proposed tap issuance will also be issued by Easy Tactic Limited, a subsidiary of Guangzhou R&F, which issued the existing notes. The tap issuance will carry the same terms and conditions as the existing notes, and they are rated at the same level as Guangzhou R&F's senior unsecured rating because they constitute its direct and senior unsecured obligations of the company. Guangzhou R&F's leverage, as measured by net debt/adjusted inventory, weakened to 69% at end-1H17, from 63% at end-2016, following aggressive expansion. Fitch believes its land bank of 49 million square metres is now sufficient for more than six years of sales and, therefore, Guangzhou R&F is likely to slow land acquisition in 2H17. However, the weakened credit metrics have made it more probable that the Rating Watch Negative (RWN) will be resolved with, at best, a Negative Outlook on Guangzhou R&F's 'BB' ratings, if affirmed. Guangzhou R&F's ratings were put on RWN following its plan to acquire Dalian Wanda Commercial Property Co. Ltd.'s (BB+/RWN) hotel assets for CNY19 billion. Fitch believes the acquisition will push up Guangzhou R&F's total debt and keep its leverage above Fitch's 60% threshold for negative rating action. The company's churn rate, as measured by contracted sales/gross debt, is likely to fall below 0.6x and may stay below this level, which will breach Fitch's threshold and may result in a rating downgrade if recurring EBITDA does not increase sufficiently to provide an offset. Contact: Jackson Hui Associate Director +852 2263 9993 Fitch (Hong Kong) Limited 19/F Man Yee Building 60-68 Des Voeux Road Central, Hong Kong Andrew Shingfun Chan Director +852 2263 9559 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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