Fitch assigns KWG notes BB-

Fitch Ratings said it assigned a BB- rating to KWG Group Holdings Ltd.’s proposed dollar-denominated senior notes. The proposed notes are rated at the same level as KWG’s senior unsecured rating because they will constitute its direct and senior unsecured obligations.

KWG’s ratings are supported by its quality and land bank, strong brand recognition in higher-tier cities across China, consistently robust profitability, strong liquidity and healthy maturity profile. The ratings are constrained by the small scale of the company’s development-property business as well as weak sales efficiency, Fitch said.

“We expect leverage, measured by net debt/adjusted inventory, to stay at around 35%-40% based on the company’s sales prospects and land-bank replenishment strategy. KWG’s leverage on an attributable basis was around 35% at end-2018 (2017: 34%). The cash collection rate decreased in 2018 due to a tighter credit environment, but leverage remained stable because the company slowed land acquisitions as it spent only 61% of sales proceeds to purchase land compared with 93% in 2017,” said Fitch in a press release.

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