S&P assigns Sunac China notes B+

S&P said it assigned its B+ long-term issue rating to a proposed offering of dollar-denominated senior unsecured notes by Sunac China Holdings Ltd. The company intends to use the proceeds primarily to refinance debt.

“We rate the notes one notch below the issuer credit rating on Sunac to reflect structural subordination risk. As of June 30, 2019, Sunac’s capital structure consisted of about Chinese renminbi (RMB) 274 billion in secured debt and RMB 65 billion in unsecured debt (including guarantees for certain joint ventures and associates of about RMB 36.5 billion). As such, the company’s secured debt ratio is around 81%, which is significantly above our notching-down threshold of 50% for issues,” said S&P in a press release.

The agency does not expect the new issuance to significantly affect Sunac’s credit profile. The company reached RMB 556.2 billion of total contracted sales for 2019, which is at the upper end of S&P’s forecast. “We anticipate the company will maintain strong sales execution and sustainable profitability, while continuing to gradually improve its financial leverage through cash collection and more controlled spending in the core development business. This is reflected in the stable rating outlook on the company,” the agency said.

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