COGO#s Proposed U.S. Dollar Senior Unsecured Notes Assigned #BBB-# Rating

Stocks and Financial Services Press Releases Friday May 11, 2018 17:16
HONG KONG--11 May--S&P Global Ratings

HONG KONG (S&P Global Ratings) May 11, 2018--S&P Global Ratings today said it has assigned its 'BBB-' long-term issue rating to a proposed issue of U.S. dollar-denominated senior unsecured notes by China Overseas Grand Oceans Finance IV (Cayman) Ltd. The parent company, China Overseas Grand Oceans Group Ltd. (COGO: BBB-/Stable/--), guarantees the proposed issuance and intends to use the net proceeds to refinance its existing debt, to finance its projects, and for general corporate purposes. The rating is subject to our review of the final issuance documentation.

We equalize the issue rating with our long-term issuer credit rating on COGO because there are no material structural subordination risks in the company's capital structure, in our view. As of Dec. 31, 2017, COGO's capital structure consisted of only HK$0.3 billion of secured debt and HK$8.9 billion of unsecured debt issued or guaranteed by its operating subsidiaries. COGO issued or guaranteed another HK$23.3 billion of unsecured debt at the holding company level. As such, its priority debt ratio is considerably below our threshold of 50%.

In the first quarter of 2018, COGO's performance was largely in line with our expectations. The company had strong sales growth of 109% to HK$9.1 billion, as it integrated the added salable resources from its parental assets injection. COGO's revenue also grew steadily by 14% to HK$4.0 billion.

The stable outlook on COGO reflects the company's accelerated revenue growth and improving balance sheet following a recent share placement. Therefore, the company's leverage is likely to improve in 2018, in our view. We also anticipate that the company will maintain steady sales growth over the next 12-24 months with slightly higher profitability.

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