S&P assigns B to Fantasia notes

S&P said it assigned a B long-term issue rating and cnBB- long-term Greater China regional scale rating to a proposed issuance of dollar-denominated senior unsecured notes by Fantasia Holdings Group Co. Ltd. (B+/stable/--; cnBB/--).

The issue rating is one notch lower than the company’s long-term corporate credit rating to reflect the structural subordination risk.

S&P expects Fantasia to use the proceeds primarily to refinance existing debt, including, but not limited to, the $250 million 13¾% senior notes due September 2017. In January 2017, Fantasia redeemed its 2019 senior notes for about $310 million. In the agency’s view, the refinancing could improve the company's funding costs and extend its maturity profile.

Fantasia's ratio of debt to EBITDA weakened to 6 times last year and S&P said it forecasts the leverage will stabilize at around the same level this year. This is supported by the agency’s view that Fantasia is using the majority of the new notes' proceeds to refinance, and it also expects the developer will be disciplined in expanding its land reserves.

S&P anticipates the company's contracted sales will reach RMB 14 billion to RMB 15 billion in 2017.

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