OREANDA-NEWS. December 15, 2015. Fitch Ratings says its ratings on Chinese homebuilder Redco Properties Group Limited (Redco; B/Stable) and its US dollar senior notes due 2019 will not be affected - even if the proposed amendments in a consent solicitation announced on 11 December 2015 are implemented.

The proposed amendments will loosen the existing indentures on the 2019 US dollar senior notes. The lower fixed-charge coverage ratio thresholds, looser methods for calculating ratios and larger debt carve-outs may give Redco headroom to incur more debt to make more investments.

If adopted, Fitch expects Redco to have greater investment and financial flexibility to expand its scale in light of the improving operating environment and liquidity easing in China. However, Redco's rating may be pressured in the event that expansion compromises leverage to the extent that net debt/adjusted inventory is sustained above 50%, and contracted sales/total debt sustained below 1.0x.

Major proposed amendments of the indenture include:
- Lowering the fixed-charge coverage ratio requirement to not less than 2.75x from not less than 3.00x;
- increasing the purchase money indebtedness basket from 20% to 30% of total assets;
- carving out third-party interest expense guaranteed by Redco or its restricted subsidiary from the calculation of consolidated interest expense; and
- including unrealised fair-value gains and losses as well as disposal gains of investment property in the calculation of consolidated EBITDA and consolidated net income.

Bond holders have till 22 December to give their consent to the proposed amendments.