Fitch Ratings has affirmed Chinese property developer
There is no grace period for the bond repayment.
The non-payment is consistent with an 'RD' rating, signifying the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a material financial obligation.
At the same time, Fitch has affirmed Modern Land's senior unsecured rating and the ratings on its US dollar bonds at 'C' with a Recovery Rating of 'RR6'.
Fitch is withdrawing the ratings as Modern Land has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings or analytical coverage for Modern Land.
Key Rating Drivers
Non-Payment of Notes: Modern Land's failure to make payment on the US dollar bonds due
Cross Default with Notes: The non-payment of Modern Land's
Derivation Summary
Modern Land's IDRs were downgraded to 'RD' in line with our definition of an uncured payment default but no initiation of bankruptcy filings, administration, receivership, liquidation, or other formal winding-up procedures as yet and continuity of business operations.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Attributable contracted sales of
Gross profit margin from property development maintained at around 25%-26% in 2021-2022;
Construction cash cost accounting for 30%-35% of attributable contracted sales in 2021-2022;
Land premium accounting for 55%-60% of annual sales receipts in 2021-2022 and average land acquisition costs to increase in 2021-2022.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that Modern Land would be liquidated in a bankruptcy because it is an asset-trading company;
We have assumed a 10% administrative claim
Liquidation Approach
The liquidation estimate reflects Fitch's view of the value of balance-sheet assets that can be realised in sale or liquidation processes conducted during bankruptcy or insolvency proceedings and distributed to creditors.
An advance rate of 60% is applied to adjusted inventory, as Modern Land's EBITDA is lower than 20%;
Property, plant and equipment advance rate at 60%;
An advance rate of 70% applied to accounts receivable;
An advance rate of 0% applied to both restricted and excess cash due to lack of clarity from the issuer on the breakdown of cash for 1H21.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant as the ratings have been withdrawn.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Issuer Profile
Modern Land, established in 2000, was listed on the
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Following the withdrawal of ratings for Modern Land Fitch will no longer be providing the associated ESG Relevance Scores.
RATING ACTIONS
Entity / Debt
Rating
Recovery
Prior
LT IDR
RD
Affirmed
RD
LT IDR
WD
Withdrawn
RD
LC LT IDR
RD
Affirmed
RD
LC LT IDR
WD
Withdrawn
RD
senior unsecured
LT
C
Affirmed
RR6
C
Page
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VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure:
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