S&P assigns B to Hengda notes

S&P said it assigned its B long-term issue rating to Scenery Journey Ltd.’s proposed dollar-denominated senior unsecured notes. Under the current issuance structure, the notes are guaranteed by Tianji Holding Ltd., with Hengda Real Estate Group Co. Ltd. providing support via a keepwell agreement. Tianji is Hengda’s core offshore operating and financing platform.

“We rate the notes one notch below the issuer credit rating on Tianji to reflect significant structural subordination risk. As of June 30, 2019, Tianji’s capital structure consists of about Chinese renminbi (RMB) 23 billion of unsecured debt at the Tianji group level. It also has RMB 110 billion of priority debt, which is either secured debt at the group level or debt at the project level. As such, Tianji’s priority debt ratio is slightly over 82%, substantially above our notching-down threshold of 50%,” said S&P in a press release.

S&P said the issuance should not significantly affect Hengda’s leverage profile because the company intends to use the proceeds mainly for refinancing and general corporate purposes. Hengda may adjust the foregoing plans in response to changing market conditions and reallocate the use of the proceeds, as the issuance is under the quota approved before the tightening on use of proceeds in July.

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