OREANDA-NEWS. S&P Global Ratings today said that it had assigned its 'B' long-term issue rating to a proposed issue of U. S.-dollar-denominated senior unsecured notes by Fantasia Holdings Group Co. Ltd. (B+/Stable/--; cnBB/--). We also assigned our 'cnBB-' long-term Greater China regional scale rating to the notes. The ratings are subject to our review of the final issuance documentation.

The issue rating is one notch lower than the long-term corporate credit rating on Fantasia to reflect the structural subordination risk. Fantasia intends to use the net proceeds to refinance its existing debt.

Fantasia's operating performance is in line with our expectation so far this year. During the first eight months ended Aug. 31, 2016, Fantasia's contracted sales were Chinese renminbi (RMB) 8.55 billion, accounting for about 70% of our full-year projection. The company remains cautious in acquiring land, given that management indicated that it would spend RMB1.5 billion–RMB2.0 billion for land reserves in 2016 and 2017. We expect Fantasia's leverage in 2016 will be close to our forecast of a debt-to-EBITDA ratio of 5x-6x.

We anticipate Fantasia will continue to expand its asset-light businesses, in line with the company's strategic transition, while maintaining stable growth in property development. In August 2016, its subsidiary and a partnership it set up in early July 2016 acquired Wanda Property Management Co. Ltd.'s residential and commercial property management. In our view, Fantasia will continue to acquire property management and community services businesses for the next two years.

Fantasia's operating scale and high leverage constrain the rating. The rating also reflects rising execution risk from Fantasia's rapid expansion in asset-light segments. However, the company's growing stable income from property management business, sizable land reserves, and long operating record in the property industry temper these weaknesses, in our view.