Fitch rates Guangzhou R&F notes BB

Fitch Ratings said it assigned Guangzhou R&F Properties Co. Ltd.'s (BB/rating watch negative) proposed dollar-denominated senior notes a BB(EXP) expected rating and placed the notes on negative watch.

The notes will be issued by Easy Tactic Ltd., a subsidiary of Guangzhou R&F, and are rated at the same level as Guangzhou R&F's senior unsecured rating because they will constitute its direct and senior unsecured obligations.

“Guangzhou R&F's leverage, as measured by net debt/adjusted inventory, weakened to 69% at end-1H17, from 63% at end-2016, following aggressive expansion,” Fitch said in a news release.

The agency believes its land bank of 49 million square meters is now sufficient for more than six years of sales and, therefore, Guangzhou R&F is likely to slow land acquisition in 2H17.

However, Fitch said the weakened credit metrics have made it more probable that the negative watch will be resolved with, at best, a negative outlook on Guangzhou R&F's BB ratings, if affirmed.

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