S&P rates DaFa Properties notes B-

S&P Global said it assigned a B- long-term issue rating to the dollar-denominated senior unsecured notes that DaFa Properties Group Ltd. proposes to issue.

The proceeds will be used to refinance existing debt.

The notes are one notch lower than the issuer credit rating on DaFa because the debt is significantly subordinated to other debt in the company's capital structure, the agency said.

As of Dec. 31, 2018, DaFa's capital structure consists of about RMB 5.6 billion of secured debt and RMB 56 million of unsecured debt, S&P said.

As such, the secured debt ratio is about 99%, which is above the threshold of 50% for notching down the issue rating, the agency explained.

S&P said it believes the ratio will have improved slightly following DaFa's issuance of $120 million in one-year senior notes in April 2019.

The stable outlook reflects an expectation that the company will continue to grow and maintain high expenditure on land acquisitions over the next 12 months, the agency said.

Despite an expectation of a moderate increase in leverage, the company could significantly reduce its reliance on high-cost alternative financing and lower its funding cost.

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