S&P rates Sichuan Languang notes B

S&P said it gave its B long-term issue rating to a proposed issuance of U.S.-dollar-denominated senior unsecured notes by Hejun Shunze Investment Co. Ltd., an indirectly owned subsidiary of Sichuan Languang Development Co. Ltd. Languang guarantees the notes.

“We rate Languang’s senior unsecured notes one notch below our issuer credit rating on the company because of significant subordination risks from secured debt. In our calculation, the proposed notes will rank below a sizable amount of priority debt in Languang’s capital structure. As of end-June 2020, the company had Chinese renminbi (RMB) 31.4 billion of unsecured debt or guarantees and RMB 46.5 billion of secured debt issued by the company and its subsidiaries. The secured debt has a priority ratio of 60%, which is above our threshold of 50%,” S&P said in a press release.

The company will use the proceeds to refinance debt.

“We expect the proposed issuance to mildly affect Languang’s leverage, given that the proceeds would be mainly used for refinancing purposes,” S&P said.

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