Bangkok--25 Jul--Fitch Ratings
Fitch Ratings (Thailand) Limited has assigned residential-property developer Risland (Thailand) Company Limited's (RLT) guaranteed debentures of THB1.5 billion due 2022 a final National Long-Term Rating of 'AA(tha)'. The Outlook is Stable.
RLT will use the proceeds from the bond issuance for business development and to repay loans. The final rating follows the receipt of documents conforming to information already received and is in line with the expected rating assigned on 23 April 2019.
KEY RATING DRIVERS
The rating on the debentures reflects the credit enhancement provided to investors by the full, unconditional and irrevocable guarantee by RLT's parent, Country Garden Holdings Co. Ltd. (CGH, BBB-/Stable). The guarantee ranks at least pari passu with CGH's unsecured and unsubordinated obligations.
DERIVATION SUMMARY
The rating of RLT's guaranteed debentures is based entirely on the credit profile of the guarantor, CGH, which is a leading homebuilder in China with one of the most well-diversified land banks among its peers, which helps it to sustain sales through business cycles. CGH has a significantly larger operating scale and greater geographic diversification of cash flows than peers in Thailand such as Thai Beverage Public Company Limited (ThaiBev, BBB-/AA(tha)/Negative), the country's market leader in spirits and beer. ThaiBev's smaller scale is offset by its dominant market position in spirits in Thailand, while the Negative Outlook on its ratings reflects the challenges the company faces in the medium term in reducing its leverage.
CGH has a stronger credit profile than Total Access Communication Public Company Limited (DTAC, BBB/AA(tha)/Stable; Standalone Credit Profile of aa-(tha)), which is the third-largest mobile-phone operator in Thailand. DTAC faces a major challenge to regain market share and stabilise earnings in the medium term due to intense price competition and its inferior network coverage. These risks are counterbalanced by its low leverage, which supports its Standalone Credit Profile of 'aa-(tha)', while its 'AA(tha)' National Long-Term Rating reflects a one-notch uplift due to moderate linkages with its parent, Telenor ASA of Norway.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to Positive Rating Action
- An upgrade in CGH's Long-Term Issuer Default Rating.
Developments That May, Individually or Collectively, Lead to Negative Rating Action
- A downgrade in CGH's Long-Term Issuer Default Rating.
For CGH's rating, the following sensitivities were outlined by Fitch in its Rating Action Commentary dated 2 April 2019:
Developments that May, Individually or Collectively, Lead to Positive Rating Action on CGH:
- EBITDA margin above 20% for a sustained period (end-2018: 21%)
- Net debt/adjusted inventory ratio below 30% for a sustained period (end-2018: 33%)
- Positive CFO, net of investments in joint ventures (JV) and associates, for a sustained period
Developments that May, Individually or Collectively, Lead to Negative Rating Action on CGH:
- Net debt/adjusted inventory ratio above 35% for a sustained period
- Attributable contracted sales/gross debt ratio below 1.5x (end-2018: 1.3x) for a sustained period
- Negative CFO, net of investments in JVs and associates for a sustained period
Additional information is available on www.fitchratings.com