(The following was released by the rating agency)
HONG KONG (Standard & Poor's) Oct. 5, 2012--Standard & Poor's Ratings Services said today that it had assigned its 'B+' issue rating and 'cnBB-' Greater China regional scale issue rating to the proposed issue of U.S.-dollar fixed-rate senior unsecured notes by Sunac China Holdings Ltd. (BB-/Negative/--; cnBB/--). The ratings are subject to our review of the final issuance documentation. The company will use the net proceeds from the proposed issuance to finance new land acquisitions and for general corporate purposes.
The issue rating on Sunac's proposed notes is one notch lower than the corporate credit rating to reflect our opinion that offshore noteholders would be materially disadvantaged, compared with onshore creditors, in the event of default.
In our view, the company's ratio of priority borrowings to total assets will remain above our notching threshold of 15% for speculative-grade debt. In our opinion, Sunac is likely to maintain its good sales execution over the next 12 months. This should lead to increased revenue recognition and stronger EBITDA, which would create a buffer for the company's high leverage. We view Sunac's business risk profile as "weak" and its financial risk profile as "aggressive," as our criteria define those terms.
The negative outlook reflects our expectation that Sunac's business expansion will remain aggressive and that its liquidity could come under pressure in the next 12 months if sales slip. Larger-than-expected acquisitions that entail significant debt funding and assumption of project debt would put pressure on liquidity.
RELATED CRITERIA AND RESEARCH
-- Sunac China Holdings Ltd. 'BB-' Rating Affirmed; Outlook Negative, Sept. 27, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Keywords: MARKETS RATINGS SUNACCHINA