Moody's negative on Yanlord, cuts senior bond rating

Moody's Investors Service said it revised the outlook on Yanlord Land Group Ltd.'s Ba2 corporate family rating to negative from stable.

Moody's also downgraded Yanlord's senior bond rating to Ba3 from Ba2 due to increased subordination risk.

The action follows Yanlord's 50% equity stake in a residential property site in Shanghai for about RMB 1.7 billion, which will be paid in five installments by July 2012, according to the agency.

"The negative outlook reflects Moody's concern that Yanlord's balance sheet liquidity will be reduced by the RMB1.7 billion payment for the Shanghai project and RMB1.8 billion for another recent acquisition of a 60% interest in a joint venture project in Tang Jia Wan District in Zhuhai, despite the attractive acquisition prices of both projects relative to the previous year's land prices," Ken Chan, a Moody's vice president, said in a statement.

Yanlord's Ba2 corporate family rating reflects its competitive business model, which focuses on high-quality properties that generate good profit margins, the agency said.

The rating also reflects the company's proven track record of replicating its business model in second-tier cities, the agency noted.

Yanlord's demonstrated access to the debt and capital markets and its history of raising equity to fund development operations also supports its rating, Moody's said.

Yanlord's rating is constrained by its revenue concentration in a few major cities, particularly Shanghai, and the volatility of its deluxe products, the agency said.

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