S&P Global Ratings affirmed Fantasia Holdings Group Co. Ltd.'s long-term issuer credit rating and the long-term issue rating on its outstanding U.S. dollar senior unsecured notes at B and revised the outlook to negative from stable.
The rating agency said the new outlook takes into account its expectation for the Chinese property developer's leverage to remain high and its refinancing risk to rise over the next 12 months.
S&P views the developer's target of 100 billion yuan of contracted sales in 2020 as a "bit steep," given the size of its land bank and salable resources. It also expects Fantasia's leverage to weaken if it boosts spending on land acquisitions beyond the rating agency's projections.
S&P added that it no longer expects Fantasia's highly leveraged position to improve in 2018 and 2019, given that the company has demonstrated an increasing appetite to engage in debt-funded acquisitions to expand its scale.
The rating agency also expects Fantasia's revenue recognition in 2018-2019 to improve only moderately, despite robust growth in its contracted sales in the 18 months to June-end, adding that the company's ability to refinance is likely to be affected by the current tough credit environment.
As of Sept. 3, US$1 was equivalent to 6.82 yuan.
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 document referred to in this news brief can be found here.