Moody’s assigns Zhenro notes B2

Moody’s Investors Service said it assigned a B2 rating to Zhenro Properties Group Ltd.’s proposed senior unsecured dollar-denominated notes. Zhenro plans to use the proceeds from the proposed notes to refinance debt.

“The proposed bond issuance will lengthen Zhenro’s debt maturity profile and will not have a material impact on its credit metrics, because it will mainly use the proceeds to refinance existing debt,” said Cedric Lai, a Moody’s vice president and senior analyst, in a press release.

Moody’s expects Zhenro’s debt leverage, as measured by revenue/adjusted debt, will trend towards 60% over the next 12-18 months from around 40% for the 12 months ended June 30. Its interest coverage, as measured by adjusted EBIT/interest, should also improve to around 2.1x from 1.8x over the same period.

The B2 senior unsecured debt rating is one notch lower than Zhenro’s B1 rating due to structural subordination risk. This risk reflects the majority of Zhenro’s claims are at its operating subsidiaries and have priority over claims at the holding company in a bankruptcy scenario. In addition, the holding company lacks significant mitigating factors for structural subordination.

The outlook is stable.

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