Moody's on Oct. 9 confirmed its ratings on Future Land Development Holdings Ltd. and unit Seazen Holdings Co. Ltd. and changed the outlooks on the companies to negative from "rating under review."
The rating agency confirmed Future Land's Ba2 corporate family rating and Ba3 senior unsecured rating, the Ba2 corporate family rating on Seazen Holdings, and the Ba2 backed senior unsecured rating for the bonds issued by New Metro Global Ltd. and guaranteed by Seazen Holdings.
Seazen Holdings is a 67.1%-owned subsidiary of Future Land Development.
The ratings confirmations indicate Moody's view that Future Land Development's good contracted sales growth and liquidity profile will provide it with certain financial buffers for the risks associated with the criminal allegations against Wang Zhenhua, the largest shareholder and former chairman of the company.
The negative outlook reflects the risks related to change of control or deterioration in the group's operations and funding access if Wang is charged. The agency said it expects credit metrics of Future Land group to improve due to its planned slowdown in expansion and strong revenue recognition.
Future Land Development's debt leverage and interest coverage are expected to improve to 70% to 75% and 3.0x to 3.5x by 2020 from 54% and 2.7x, respectively, for the 12 months ended in June. Seazen Holdings' adjusted revenue/debt and adjusted EBIT/interest coverage are estimated to improve to 75% to 80% and 3.5x to 4.0x from 57% and 3.0x, respectively, over the same period.
