Fitch rates China Vanke notes BBB+

Fitch Ratings said it assigned China Vanke Co., Ltd.'s (Vanke; BBB+/stable) proposed senior unsecured dollar-denominated notes an expected rating of BBB+(EXP).

The proposed notes are to be issued under the $7 billion medium-term note program by Vanke's subsidiary, Vanke Real Estate (Hong Kong) Co. Ltd. (Vanke HK).

Proceeds will be used for general corporate purposes.

Fitch said the rating is driven by China Vanke's position as a top Chinese homebuilder by sales and its ability to maintain a healthy financial profile, with contracted sales consistently rising by a CAGR of over 20% since 2007 to reach RMB 529.9 billion in 2017.

“Vanke's EBITDA margin has averaged around 22%-23% over the previous three years. Its churn rate, as measured by contracted sales/gross debt, of 2.8x at end-2017, remains the highest among rated peers and leverage, as measured by net debt/adjusted inventory, remained at a low 4%,” the agency said in a news release.

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