S&P rates Seazen notes BB-

S&P said it assigned its BB- long-term issue rating to the proposed dollar-denominated senior unsecured notes Seazen Group Ltd. will guarantee. New Metro Global Ltd., a special purpose financing vehicle of Seazen Group, will offer the notes.

Seazen intends to use the proceeds to refinance debt, in particular $350 million of senior unsecured notes due in February 2020.

“We rate the notes one notch below the issuer credit rating on Seazen Group to reflect subordination risk, similar to the company’s outstanding senior unsecured notes. As of June 30, 2019, Seazen Group’s capital structure consisted of Chinese renminbi (RMB) 59.6 billion of secured debt and RMB 45 billion of unsecured debt. Seazen Group has about RMB 104 billion in total reported debt, and its ratio of secured debt to total debt was 57% as of June 30, 2019, above our issue notching down threshold of 50%. Moreover, the total priority debt will be materially higher and account for over 80% of the group’s total borrowings. This is because there is a significant amount of unsecured debt at the subsidiary level, such as issuances from Seazen Holdings Co. Ltd., its A-share platform subsidiary,” said S&P in a press release.

On Tuesday, Seazen Group raised more than HK$2.7 billion from a new share placement of up to 5.01% of its enlarged equity base. The shareholding of founder Wang Zhenhua and his son Wang Xiaosong will be diluted to 67.77% following this transaction. Seazen Group’s ownership of Seazen Holdings will not be affected.

According to Seazen Group, the equity raise proceeds will be used for the company’s business development and general working capital. “In our view, this transaction highlights the additional financing capability enabled by Seazen Group’s unconventional ownership structure and dual-listing on both the Hong Kong and Shanghai stock exchange,” S&P said.

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