TEXT-S&P Assigns 'BB' And 'cnBBB' Rtgs To Longfor's Proposed Notes


(The following was released by the rating agency)

HONG KONG (Standard & Poor's) Oct. 11, 2012--Standard &Poor's Ratings Services today assigned its 'BB' issue rating toa proposed issue of U.S.-dollar-denominated seven-year seniorunsecured notes by Longfor Properties Co. Ltd. (BB+/Stable/--;cnBBB+/--).

At the same time, we assigned our 'cnBBB' Greater Chinaregional scale rating to the proposed notes. The ratings aresubject to our review of the final issuance documentation.

Longfor intends to use the proceeds to finance existing andnew property projects, refinance certain existing indebtedness,and for general corporate purposes. The issue rating is onenotch lower than the corporate credit rating to reflect ouropinion that offshore noteholders would be materiallydisadvantaged, compared with onshore creditors, in the event ofdefault. In our view, Longfor's ratio of priority borrowings tototal assets is likely to remain above our notching threshold of15% for speculative-grade debt.

The corporate credit rating on Longfor reflects thecompany's rapid growth strategy and short track record as alarge-scale developer. In addition, Longfor is exposed to thehigh-end real estate market in tier-one cities in China. Thissegment is challenging because it is affected by governmentpolicies to cool investment demand and housing prices.Nevertheless, in our view, the company's good competitiveposition and strong execution capability are likely to improveits financial performance despite the uncertain outlook forChina's real estate market.

While Longfor's results for the first six months of thisyear met our expectation, its debt-to-capital ratio was higherthan we had anticipated, at 50%. The company's recent Hong Kongdollar 3 billion share placement will alleviate some of thepressure on its capital structure, in our opinion. The stableoutlook on Longfor reflects our expectation that the company candemonstrate conservative cash and debt management to generatepositive cash flow while pursuing high growth. In our view,Longfor's good competitive position and strong execution willhelp to maintain healthy sales and margin amid the deepeningmarket correction in 2012.