Jingrui Holdings Ltd.'s Proposed U.S. Dollar Senior Unsecured Notes Assigned 'B-' Rating

HONG KONG (S&P Global Ratings) April 1, 2019--S&P Global Ratings today 
assigned its 'B-' long-term issue rating to a proposed issue of 
U.S.-dollar-denominated senior unsecured notes by Jingrui Holdings Ltd. 
(B/Stable/--). The China-based developer will use the proceeds to refinance 
its existing debt and for general corporate purposes. The issue rating is 
subject to our review of the final issuance documentation.

We rate the notes one notch lower than the issuer rating on Jingrui to reflect 
subordination risks because the proposed notes will rank behind a material 
amount of priority debt in the company's capital structure. As of Dec. 31, 
2018, Jingrui's capital structure consisted of Chinese renminbi (RMB) 11.2 
billion in secured debt, which is mainly at the subsidiary level, and RMB5.1 
billion in offshore senior unsecured notes, as well as RMB2.4 billion in 
domestic corporate bonds. As such, its priority debt ratio was 73% as of 
December 2018, exceeding our notching-down threshold of 50%.  

Jingrui's profitability has improved toward the industry average, with 
reported gross margins of about 23% in 2018, compared with 16% in 2017. The 
improvement in profitability has partly offset the increase in total debt. 
That said, we expect the company's financial leverage to remain high over the 
next one to two years. This is mainly attributable to weaker revenue 
recognition than our expectation because of the company's growing number of 
jointly controlled projects, as well as the pressure to replenish land for 
future development given its limited unsold land bank. 

We could lower the rating if Jingrui's debt servicing ability worsens beyond 
our base case. This could be indicated by a debt-to-EBITDA ratio on a 
proportionally consolidated basis significantly weakening from our expectation 
of about 8x, or consolidated EBITDA interest coverage of 1.5x over the next 12 
months. Although rating upside is limited, a significant improvement in 
Jingrui's scale and profitability, combined with debt-to-EBITDA ratio on a 
proportionally consolidated basis staying sustainably below 5x, could lead to 
an upgrade.
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