S&P Global Ratings downgraded Yanlord Land Group Ltd.'s long-term issuer credit rating to BB-, with a stable outlook.
The rating agency said Jan. 21 that the downgrade reflects the company's elevated leverage following its acquisition of United Engineers Ltd. It added that, notwithstanding Yanlord Land's expected debt reduction following the deal, it will be difficult for the entity to achieve a prompt recovery in its financial profile commensurate with its original rating.
The downgrade also takes into account an expected deterioration in Yanlord Land's profitability due to the company's exposure to higher market volatility given its niche business focus, Ratings said. It believes Yanlord Land will face increasing margin compression over the next one to two years.
Ratings also noted that the outlook on Yanlord Land was removed from CreditWatch, with negative implications. The stable outlook on the company's ratings reflects the rating agency's expectation that Yanlord Land will focus on controlling leverage over the next 12 months through cash collection from sales and debt reduction.
Ratings said it expects Yanlord Land to achieve faster revenue growth in 2020, compared with 2019, while maintaining satisfactory profitability.
As of Jan. 21, US$1 was equivalent to 6.91 Chinese 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 documents referred to in this news brief can be found here.