(The following was released by the rating agency)
HONG KONG, October 12 (Fitch) Fitch Ratings has assigned property developer Sunac China Holdings Limited's (Sunac, 'BB-'/Stable) USD400m 12.5% notes due 2017 a final rating of 'BB-'. The assignment of the final rating follows the receipt of documents conforming to information already received and the final rating is in line with the expected rating assigned on 4 Oct 2012.
The notes are rated at the same level as Sunac's to reflect that they represent direct, unconditional, unsecured and unsubordinated obligations of the company.
Sunac's ratings are supported by its strong housing presales performance and its increased business scale in the Chinese housing market. The ratings are constrained by Sunac's limited geographical diversification and product mix.
What could trigger a rating action?
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- adverse changes to Sunac's markets and product mix leading to an EBITDA margin below 25% (2011: 28.1%)
-aggressive land-bank acquisitions resulting in funds from operations (FFO) interest coverage below 3x (2.6x in 2011 but Fitch expects this to exceed 3.5x from 2012) or net debt/inventory above 35% (34% in 2011)
-contracted sales in 2012 of under CNY20bn Positive: Positive rating action is not expected in the next 24 months given the constraints posed by its limited product mix and lack of diversification.
Keywords: MARKETS RATINGS SUNAC