RLT will use the proceeds from the bond issuance to repay loans, as well as for working capital and liquidity management.
KEY RATING DRIVERS
The rating on the proposed guaranteed debentures reflects the credit enhancement provided to investors by the full, unconditional and irrevocable guarantee by RLT's parent, Country Garden Holdings Company Limited (BBB-/Stable). The guarantee ranks at least pari passu with Country Garden's unsecured and unsubordinated obligations.
DERIVATION SUMMARY
The rating of RLT's proposed guaranteed debentures is based entirely on the credit profile of the guarantor, Country Garden, a leading homebuilder in China with one of the most well-diversified land banks among peers, which helps it to sustain presales through business cycles.
Country Garden has a significantly larger operating scale and greater geographical diversification of cash flow than peers in Thailand, such as Thai Beverage Public Company Limited (ThaiBev, BBB-/AA(tha)/Stable), the country's market leader in spirits and beer. ThaiBev's smaller scale is offset by its dominant market position in spirits in Thailand. The two companies have similar financial leverage over the medium term. The rating of RLT's guaranteed debentures is, therefore, at the same level as ThaiBev's National Rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
- An upgrade in Country Garden's Long-Term Issuer Default Rating (IDR).
Factors that could, individually or collectively, lead to negative rating action/downgrade:
- A downgrade in Country Garden's Long-Term IDR.
A one-notch downgrade in Country Garden's Long-Term IDR could result in a multiple-notch downgrade to the National Long-Term Rating on RLT's guaranteed debentures.
For Country Garden's rating, the following sensitivities were outlined by Fitch in our Rating Action Commentary dated 25 June 2021:
Factors that could, individually or collectively, lead to positive rating action/upgrade:
- Net debt/adjusted inventory ratio sustained below 30%;
- Sustained positive cash flow from operations (CFO).
Factors that could, individually or collectively, lead to negative rating action/downgrade:
- Net debt/adjusted inventory ratio above 35% for a sustained period;
- Continued negative CFO;
- EBITDA margin, excluding capitalised interest, below 20% for a sustained period.
ISSUER PROFILE
RLT is 100% indirectly owned by Country Garden, one of the largest property developers in China, with more than 2,900 projects. RLT launched its first two projects in Thailand in 2018. It now has seven condominium and low-rise projects.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The rating of the debentures is based entirely on the rating of the guarantor, Country Garden.
Additional information is available on www.fitchratings.com
Source: Fitch Ratings