Ranking Motion: Moody’s assigns Ba2 to Seazen’s proposed USD notes
World Credit score Analysis – 26 Jan 2021
Hong Kong, January 26, 2021 — Moody’s Traders Service has assigned a Ba2 senior unsecured score to the proposed USD notes to be issued by New Metro World Restricted and assured by Seazen Group Restricted (Ba1 steady).
New Metro is a wholly-owned subsidiary of Seazen Holdings Co., Ltd. (Ba1 steady), which in flip is a 67.2%-owned subsidiary of Seazen Group.
Seazen Group will use the proceeds of the notes primarily to repay its offshore debt.
“The proposed issuance will prolong Seazen Group’s debt maturity profile with out materially affecting its monetary profile, because the proceeds can be primarily used to refinance present debt,” says Kaven Tsang, a Moody’s Senior Vice President, and in addition Moody’s Lead Analyst for Seazen Group.
Seazen Group’s Ba1 company household score (CFR) primarily displays the credit score profile of Seazen Holdings, which accounts for 99.6% of Seazen Group’s revenues within the first half of 2020 and 86.9% of its debt as of the tip of June 2020, and is underpinned by the corporate’s strong gross sales execution means, sizable operation scale and rising stream of recurring rental earnings.
On the identical time, the CFR is constrained by the corporate’s geographic focus within the Yangtze River Delta space and publicity to joint-venture (JV) companies.
Moody’s expects Seazen Group will develop its enterprise with monetary self-discipline, such that its contracted gross sales will develop 5%-10% yearly within the subsequent 1-2 years whereas its annual debt progress will stay round 10%. In consequence, Seazen Group’s income/adjusted debt and EBIT/curiosity protection will keep robust at 105%-110% and 4.0x-4.5x respectively over the following 1-2 years, in contrast with 91% and 4.3x for the 12 months ended June 2020.
Moreover, Moody’s expects Seazen Group’s rental earnings (excluding earnings from industrial property administration companies) to develop to RMB4.5 billion-RMB6.0 billion over the following 1-2 years from Moody’s estimate of round RMB3 billion in 2020 and RMB2.3 billion in 2019. In consequence, Seazen Group’s rental earnings/curiosity protection will strengthen to 60%-70% over the following 1-2 years from 38% in 2019. Such monetary metrics help the corporate’s Ba1 CFR.
Seazen Group’s liquidity is sweet. Moody’s expects its money holdings, along with its money circulate from working actions, can be sufficient to cowl its maturing debt (together with onshore puttable bonds) and dedicated land funds over the following 12-18 months.
Moody’s has additionally thought-about the next environmental, social and governance (ESG) elements in its evaluation.
From a governance perspective, the corporate’s possession is concentrated in its former chairman, who holds a 68.0% stake in Seazen Group. This threat is mitigated by its established administration workforce, in addition to its good institutional governance constructions and requirements as required by the Hong Kong Inventory Change.
Seazen Group’s Ba2 senior unsecured bond score is one notch decrease than its CFR due to structural subordination threat. Most of Seazen Group’s claims are on the subsidiary degree and have precedence over claims on the holding firm in a chapter state of affairs. As well as, the holding firm lacks important mitigating elements for structural subordination.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Seazen Group’s steady outlook displays Moody’s expectation that the corporate will preserve its robust credit score metrics, monetary self-discipline and good liquidity whereas pursuing progress in contracted gross sales and rental earnings within the subsequent 1-2 years.
Seazen Group could possibly be upgraded if it additional diversifies its land financial institution when it comes to geographic location and sustains its contracted gross sales and rental earnings progress, whereas sustaining a robust monetary and liquidity profile, with rising rental earnings that may largely cowl gross curiosity bills.
A major discount in contingent liabilities related to JVs or a decrease probability of offering funding help to JVs is also constructive to the rankings.
However, Seazen Group could possibly be downgraded if its contracted gross sales progress slows or it pursues aggressive progress, such that its credit score metrics weaken with EBIT/curiosity protection falling under 4.0x, income/adjusted debt falling under 75%-80%, or rental earnings/curiosity staying below 50%, all on a sustained foundation; or its liquidity weakens, as mirrored by money/short-term debt falling under 125%.
Downward stress might additionally enhance if the corporate’s contingent liabilities related to JVs or the probability of offering funding help to JVs will increase considerably.
The principal methodology used on this score was Homebuilding And Property Improvement Business printed in January 2018 and obtainable at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1108031. Alternatively, please see the Ranking Methodologies web page on www.moodys.com for a duplicate of this system.
Seazen Group Restricted operates via its 67.2%-owned mainland subsidiary, Seazen Holdings Co., Ltd., and engages primarily in residential improvement in China. Seazen Group was based in 1996 by Wang Zhenhua, who’s the previous chairman of Seazen Group and Seazen Holdings. Wang Zhenhua is the most important shareholder of Seazen Group, holding a 68.0% stake within the firm, and has been concerned within the property improvement enterprise in China (A1 steady) since 1993. The corporate had a land financial institution unfold throughout 115 cities in China, with a complete gross ground space (GFA) of round 137.1 million sq. meters on the finish of June 2020.
For additional specification of Moody’s key score assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Ranking Symbols and Definitions could be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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The World Scale Credit score Ranking on this Credit score Ranking Announcement was issued by certainly one of Moody’s associates exterior the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Important 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Ranking Businesses. Additional info on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is obtainable on www.moodys.com.
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Kaven Tsang Senior Vice President Company Finance Group Moody's Traders Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Shopper Service: 852 3551 3077 Franco Leung Affiliate Managing Director Company Finance Group JOURNALISTS: 852 3758 1350 Shopper Service: 852 3551 3077 Releasing Workplace: Moody's Traders Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Shopper Service: 852 3551 3077
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