[ET Net News Agency, 10 November 2017] Moody's Investors Service has upgraded China
Evergrande Group's corporate family rating to B1 from B2 and senior unsecured debt rating
to B2 from B3.
The outlook for the ratings is stable.
"The upgrade reflects our expectation that Evergrande will deleverage and maintain
sufficient liquidity in the next 12-18 months consistent with a corporate family rating of
B1," said Franco Leung, a Moody's Vice President and Senior Credit Officer.
Moody's expects that Evergrande's adjusted debt leverage -- measured by revenue/adjusted
debt -- will improve to 55%-65% over the next 12-18 months from around 41% for the 12
months ended June 2017 and around 32% in 2016. Such levels support the company's B1
corporate family rating.
The expected improvement in debt leverage will come from a combination of slow debt
growth consistent with the company's deleveraging plans as well as the maintenance of
positive growth in contracted sales.
Evergrande current business plan is to reduce its land reserves by 5%-10% per annum
between July 2017 and June 2020. This strategy will decrease its capital expenditure
requirements which will in turn reduce debt leverage.
Evergrande's sizable land reserves, which totaled 276 million square meters in gross
floor area at end-June 2017, will support its positive contracted sales growth. Moody's
expects the company to achieve contracted sales growth of around 10% in the next 12
months. This compared with the 33% year-on-year growth to RMB422 billion for the first
ten months of 2017 and 85% year-on-year growth to RMB373 billion for the full year 2016.
(KL)