(The following statement was released by the rating agency)
March 14 - Standard & Poor’s Ratings Services today assigned its ‘B+’ issue rating and ‘cnBB’ Greater China credit scale issue rating to the proposed issue of U.S.-dollar fixed-rate senior unsecured notes by KWG Property Holding Ltd. (BB-/Stable/--; cnBB+/--). The rating is subject to our review of the final issuance documentation. The company will use the net proceeds from the proposed issuance for financing existing and new property projects and for general working capital purposes.
The issue rating is one notch lower than the corporate credit rating due to structural subordination risk. We believe the company’s ratio of priority debt to total assets will likely remain above our threshold of 15% for speculative-grade debt in the next 12 months.
The rating on KWG reflects the company’s short operational record outside its home city of Guangzhou, fairly aggressive debt-funded expansion into new markets, and exposure to the high-end residential property segment. In our view, this segment is more vulnerable to the Chinese government’s home-purchase restrictions and other policy measures to control property prices. KWG’s established market position in Guangzhou, satisfactory performance in new markets, and better execution and more consistent financial management than similar-rated peers’ temper these weaknesses.
The stable outlook on KWG reflects the good visibility over the company’s financial performance, which we expect to remain satisfactory in 2012, as reflected in its credit metrics. We also expect KWG to continue to manage its expansion and leverage with caution.
-- KWG Property Holding Ltd. ‘BB-’ Rating Affirmed On Likely Satisfactory Financial Performance; Outlook Stable, March 7, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Key Rating Factors For Chinese Real Estate Developers, June 2, 2008
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008