Fitch rates Landsea notes B

Fitch Ratings said it assigned a B rating and a recovery rating of RR4 to Landsea Green Properties Co., Ltd.’s proposed dollar-denominated senior notes. The notes are rated at the same level as Landsea’s senior unsecured rating, as they represent its direct, unconditional, unsecured and unsubordinated obligations.

Landsea’s rating is supported by its land bank in China and the U.S., which should maintain contracted sales at above CNY 12 billion and healthy profitability.

Fitch said it uses the consolidated financials of Landsea Group Co. Ltd, which holds a 50.1% equity interest in Landsea. The agency regards the linkage between the two entities to be strong, due to high senior management overlap, strong parental control over Landsea’s board, and historical intragroup asset transfers, in line with its parent and subsidiary rating linkage criteria.

Fitch estimates Landsea Group’s leverage, as measured by lease-adjusted net debt/adjusted inventory, rose to around 45% in 2019 due to land replenishment pressure and continuous capex required to expand its long-term rental-apartment business.

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