Xinyuan Real Estate Co. Ltd.#s Proposed U.S. Dollar Senior Unsecured Notes Assigned #B-# Rating

Stocks and Financial Services Press Releases Monday November 13, 2017 17:32
HONG KONG--13 Nov--S&P Global Ratings

HONG KONG (S&P Global Ratings) Nov. 13, 2017--S&P Global Ratings today said it has assigned its 'B-' long-term issue rating to a proposed issue of U.S. dollar-denominated notes by Xinyuan Real Estate Co. Ltd. (B/Stable/--). The rating is subject to our review of the final issuance documentation.

The senior, unsecured notes are rated one notch below the corporate credit rating. This reflects the subordination risk, because the notes rank behind a significant amount of secured debt in the capital structure.

We expect the China-based developer to use the proceeds mainly for refinancing of existing debt, including the replacement of some of its higher-cost onshore borrowings. As such, we do not expect the proposed issuance to significantly affect Xinyuan's credit profile.

Xinyuan's year-to-date performance has been generally in line with our expectations, with stable growth in contracted sales and revenues, and a recovery in margins. We expect Xinyuan's contracted sales to reach Chinese renminbi (RMB) 12 billion- RMB14 billion in 2017. Despite the improved operating performance, the company's leverage will likely hover at 7.5x-8.5x in 2017 and 2018, from 7.0x in 2016. This is because we expect debt to increase after factoring in considerably higher capital expenditures.

The stable outlook reflects our expectation that Xinyuan will modestly increase its sales and margins over the next 12 months. We expect the company's leverage to remain stable but high over the period due to its need to replenish land reserves and finance construction costs.

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