ข่าวประชาสัมพันธ์การเงิน/หลักทรัพย์

China South City Holdings Ltd.’s Proposed U.S. Dollar Senior Unsecured Notes Assigned ‘B-‘ Rating

          HONG KONG (S&P Global Ratings) Jan. 18, 2018--S&P Global Ratings today assigned its 'B-' long-term issue rating to a proposed issue of U.S. dollar-denominated senior unsecured notes by China South City Holdings Ltd. (CSC; B/Negative/--). The issue rating is subject to our review of the final issuance documentation. 
          We rate the senior unsecured notes one notch lower than the issuer credit rating because of subordination risk. The proposed notes will rank behind a material amount of secured debt and subsidiary-level debt in CSC's capital structure. As of Sept. 30, 2017, the China-based developer and trade-center operator had around Hong Kong dollar (HK$) 29.9 billion in unsecured debt at the subsidiary level and secured debt, out of total debt of HK$35.3 billion.
          We expect CSC to refinance existing debt with most of the notes' proceeds, including Chinese renminbi (RMB) 500 million domestic short-term notes due in March. The rest will be used for general corporate purposes. In our view, the new issuance will help the company to meet debt repayments, lengthen its maturity profile, and manage average funding costs. 
          CSC sales expanded by 24% in the first three quarters of fiscal 2018 (ending March 2018), to HK$8.4 billion, putting the company on track to reach the HK$11 billion target we project for the full fiscal year, in line with our base-case. Residential properties will continue to contribute more than 70% of sales, because market appetite for commercial properties in trade centers remains weak. In the first half, recurring income rose 25%, driven by solid performances in the property management and outlets operations segments. 
          By our estimates, the company's debt will surpass HK$36 billion by the end of fiscal 2018, so its leverage will remain elevated in the next 12-18 months. 
          Our negative rating outlook on CSC reflects our view that the company's operating environment will remain tough in the next 12 months amid weaknesses in trade center sales in China. We expect the company to curb its capital expenditure and maintain stable leverage in fiscals 2018 and 2019. Our base case anticipates that CSC's debt-to-EBITDA ratio will be around 13x-14x for fiscal 2018.