Fitch Ratings affirmed the long-term issuer default rating of Hong Kong-based real estate developer China South City Holdings Ltd. at B, with a stable outlook.
The rating agency also affirmed the company's senior unsecured rating and the rating on its outstanding U.S. dollar senior notes at B.
The ratings are backed by increasing residential revenues from the company's projects in high-tier cities, a long record in integrated trade center development, and adequate liquidity. The ratings are limited by the developer's partial project diversification, increasing leverage and a weak industry outlook, among other factors.
Fitch believes that the company's leverage will rise in the next three years but will remain under 50% and that its development margin will fall because of the recognition of more residential sales, which suffer from lower margins in comparison to trade center sales.