Fitch to rate Ecuador social bond AAA, B-

Fitch Ratings said it expects to rate classes A and B 144A/Reg S notes to be issued by Ecuador Social Bond Sarl AAAsf and B-sf, respectively. The outlook is stable.

The Republic of Ecuador expects to obtain funding to finance its social housing program by offering the class A and B notes.

The social bond, issued by Ecuador and partially guaranteed by the Inter-American Development Bank, will be the asset backing the class A and B notes (together the repack notes). The assigned ratings address timely payment of interest and principal on a semi-annual basis.

Fitch rates Ecuador’s social bond B

Fitch Ratings said it assigned Ecuador’s $400 million partially-guaranteed social bond an expected B rating. The social bond will benefit from a $300 million partial credit guarantee provided by the Inter-American Development Bank for scheduled debt service payments.

The expected rating on the social bond represents a one-notch uplift above Ecuador’s long-term foreign-currency issuer default rating of B-, reflecting Fitch’s assessment partially-guaranteed protected issuance would benefit from a higher recovery rate than unsecured obligations of Ecuador in the event of a default by the sovereign.

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.

Moody's assigns Landsea Green bond B3

Moody's Investors Service said it assigned a B3 senior unsecured rating to the proposed dollar-denominated bond to be issued by Landsea Green Properties Co., Ltd.

Landsea plans to use the proceeds to refinance debt.

“The proposed bond issuance will lengthen Landsea's debt maturity profile without materially impacting its credit metrics, as the proceeds will be used to refinance existing debt,” said Cedric Lai, a Moody's vice president, senior analyst and also Moody's lead analyst for Landsea, in a press release.

Landsea's B2 corporate family rating is supported by its recognized brand in the niche green property market, where its green products have achieved sustained demand and higher selling prices than traditional property offerings. The rating also reflects Landsea's asset-light business model, allowing it to earn service income while requiring limited capital and borrowed funds when compared to fully owned property development projects.

S&P gives Landsea Green notes B-

S&P said it assigned its B- long-term issue rating to the dollar-denominated senior unsecured notes Landsea Green Properties Co. Ltd., proposes to issue.

“We rate the notes one notch below the issuer credit rating on Landsea (B/Stable/--), given significant subordination risk in the China-based developer’s capital structure. As of Dec. 31, 2018, Landsea’s capital structure consists of Chinese renminbi (RMB) 2.4 billion in secured debt, RMB 1.7 billion in unsecured debt issued by Landsea, and RMB 3.4 billion in unsecured debt issued or guaranteed by the company’s operating subsidiaries. The priority debt ratio is 77%, above our 50% threshold for notching down the issue rating,” S&P said in a press release.

“We expect the proposed issuance to alleviate Landsea’s refinancing pressure and lengthen its debt maturity profile. Landsea will use the net proceeds to refinance its borrowings, in accordance with its green bond framework. The company has about RMB 2.3 billion of debt maturing in 2020, about 35% of its total indebtedness. This includes $200 million of green notes due in April 2020,” the agency said.

Last year, Landsea’s contracted sales from projects with equity interest were RMB 26 billion, in line with S&P’s forecast of RMB 26 billion-RMB 28 billion. The 2019 figure is 10% higher than the 2018 tally of RMB 23.6 billion. However, the company’s market position remains weak relative to that of peers with similar ratings due to its small scale and geographical concentration in a few key cities.

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