Fitch rates Poly Real Estate notes BBB+

Fitch Ratings said it assigned an expected rating of BBB+ to Poly Developments and Holdings Group Co., Ltd.'s proposed dollar-denominated senior unsecured notes.

The proposed notes will be issued by subsidiary, Poly Real Estate Finance Ltd. and unconditionally and irrevocably guaranteed by Poly Real Estate Finance's parent, Hengli (Hong Kong) Real Estate Ltd., a wholly owned subsidiary of Poly Real Estate, Fitch said.

The proposed notes are rated at the same level as Poly's senior unsecured rating as Poly has granted a keepwell deed and a deed of equity interest purchase undertaking to ensure the issuer and guarantor have sufficient assets to meet their respective obligations for the senior notes, the agency said.

The proceeds will be used to refinance existing offshore indebtedness, Fitch said.

Fitch said it expects Poly's leverage to remain at higher than 55% in 2018, but to decline from 2019, underpinned by cash collection rate recovery and slower land replenishment.

The slower land acquisition pace will allow Poly to de-leverage from the second half of 2018, the agency said.

Poly relies much less on working capital than other large Chinese homebuilders, which take advantage of their strong bargaining power in the supply chain to obtain more favorable payment terms with their contractors and suppliers, Fitch said.

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