S&P rates Powerlong notes B

S&P said it assigned a B long-term issue rating to the dollar-denominated senior unsecured notes that Powerlong Real Estate Holdings Ltd. proposes to issue.

The proceeds will be used to refinance its existing debt.

The agency said it rates Powerlong's senior unsecured notes one notch lower than the issuer credit rating given significant subordination risk in its capital structure.

As of Dec. 31, 2017, Powerlong's capital structure consisted of RMB 18.8 billion in secured debt, RMB 14 billion in unsecured debt and RMB 6 billion unsecured debt issued or guaranteed by the company's operating subsidiaries, S&P explained.

The agency said it considers its priority debt to be higher than 50%.

S&P said it expects additional refinancing over the next six months to continue to improve the company's debt maturity profile.

Powerlong's pace of de-leveraging has been somewhat slower than expected, but the company has scaled back its expansion amid a softening market in the second half of 2018, the agency said.

The company's debt-to-EBITDA ratio is expected to decline to 6.6x in 2018 and 5.7x in 2019, from 7x in 2017, S&P added.

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