S&P rates Vanke Real Estate notes BBB

S&P said it assigned a BBB long-term issue rating to the senior unsecured notes proposed by Vanke Real Estate (Hong Kong) Co. Ltd.

The notes are ranked pari passu to all unsecured and unsubordinated obligations of the issuer.

The proceeds will be used for general corporate purposes.

Vanke Real Estate is a wholly owned subsidiary of China Vanke Co. Ltd., the agency noted.

The senior unsecured notes are rated one notch lower than the issuer credit rating on Vanke Real Estate to reflect structural subordination risk, S&P said.

China Vanke's 2017 results were weaker than expectations with its debt-to-EBITDA ratio rising to 3.3x, from 2.6x in 2016 due to a significant increase in borrowings that more than offset margin improvement, the agency said.

The rise in leverage is tempered by the company's large cash balance, which covered 86% of reported debt, S&P said.

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