OREANDA-NEWS. S&P Global Ratings today assigned its 'BB-' long-term issue rating to a proposed issue of U. S. dollar-denominated senior unsecured notes by RKI Overseas Finance 2016 (A) Ltd. At the same time, we assigned our 'cnBB+' long-term Greater China regional scale rating to the notes, which are guaranteed by Road King Infrastructure Ltd. (BB-/Stable/--; cnBB+/--). The ratings are subject to our review of the final issuance documentation.

The issue rating is the same as the corporate credit rating on Road King. The China-based property developer and toll road operator intends to use the net proceeds to refinance its existing debts.

The rating on Road King reflects our view of the company's moderate operating scale, weak market position, and volatile financial performance in property development. These weaknesses are tempered by the stable cash flow from its toll road business, which we estimate will contribute around Chinese renminbi (RMB) 500 million in 2016. Road King has maintained good sales growth so far this year, partly thanks to supportive credit policy in China. In the first six months of 2016, the company achieved RMB9.1 billion in contracted sales, 77% higher than the same period in 2015.

In our view, Road King maintains prudent financial management. The company scaled back land acquisitions in 2015 and only acquired three land parcels for a total of Hong Kong dollar 3.4 billion. We expect revenue to recover by 5%-10% in 2016 as sales increase, while the margins should remain largely stable. Overall, we forecast the company's debt-to-EBITDA ratio to remain at 4.0x-4.5x for the next two years.

The stable outlook on Road King reflects our expectation that the company is likely to moderately increase its property sales and maintain a largely stable profit margin over the next 12 months. We also expect cash flows from the company's toll-road business to remain stable and solid, which partly offsets the high capital spending on property construction.