Fitch rates Country Garden notes BBB-

Fitch Ratings said it assigned a BBB- rating to Country Garden Holdings Co. Ltd.’s proposed dollar-denominated senior notes. The proposed notes are rated at the same level as Country Garden’s senior unsecured rating because they will constitute its direct and senior unsecured obligations.

Country Garden’s ratings are supported by its strong business profile and healthy financial profile. The company has a well-diversified land bank that allows it to achieve consistent contracted sales. Its leverage, as measured by net debt/adjusted inventory including joint-venture adjustments and guarantees provided to JV and associates, rose in the first half of 2019. Fitch estimates leverage was maintained at 30%-35% in 2019.

Country Garden’s ratings are constrained by its volatile cash flow from operations. However, Fitch believes it remained positive for 2019. Country Garden has an adequate land bank to support its contracted sales and the company has demonstrated a good record in responding to changing market conditions, such as adjusting its city-tier mix, which supports a sustainable financial profile, the agency said.

“Fitch expects Country Garden’s high-churn strategy to generate consistent cash collection that is sufficient for the company to fund land banking and construction activities without increasing leverage significantly,” the agency said in a press release.

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