Moody’s: China Evergrande notes B3

Moody's Investors Service said it assigned a B3 senior unsecured rating to China Evergrande Group's (B2 stable) proposed dollar-denominated notes.

The outlook is stable.

Proceeds will be used to refinance the company's existing debt – including some of its outstanding dollar-denominated notes – and for general corporate purposes.

Moody’s said the B3 senior unsecured rating reflects Evergrande's B2 corporate family rating and a one-notch downward adjustment for legal and structural subordination.

The B2 corporate family rating primarily considers the company's strong market position and sales execution, low-cost land bank, as well as its nationwide coverage in China. However, these strengths are counterbalanced by its high business risk and weak financial metrics, given its debt-funded and fast growth business strategy, the agency explained.

"The proposed notes will unlikely reverse Evergrande's trend of an improving debt leverage," Moody's vice president and senior credit officer Franco Leung said in a news release.

"And, the issuance will improve Evergrande's debt maturity profile, because part of the proceeds will be used to refinance its existing notes."

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