S&P Global Ratings placed its B+ long-term issuer credit rating on Fantasia Holdings Group Co. Ltd. on CreditWatch with negative implications.
The rating agency said the move reflects the "significant deterioration" in the Chinese property company's financial leverage at the end of 2017 resulting from its aggressive land acquisitions and slower than expected revenue growth.
S&P Global Ratings said it had expected Fantasia to pursue a moderate growth strategy in property development and focus on an asset-light business model, but the company is changing its strategy and increasingly focusing on property development.
Citing its preliminary estimation, the rating agency noted that Fantasia's debt-to-EBITDA ratio has increased to more than 10x in 2017, compared to a forecast of roughly 6x. The leverage is less likely to materially decrease in the next one to two years as the company aims to expand its sales target and will continue to spend large amounts of capital on land acquisitions to replenish its land reserves.
The rating agency said it intends to resolve the CreditWatch in the next three months in light of more clarity from Fantasia management on the company's strategies and financial policies.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.