OREANDA-NEWS. S&P Global Ratings today assigned its 'B-' long-term issue rating and 'cnB+' long-term Greater China regional scale rating to a proposed issue of U. S.-dollar-denominated senior unsecured notes by Powerlong Real Estate Holdings Ltd. (B/Stable/--; cnBB-/--). The rating is subject to our review of the final issuance documentation.

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

Powerlong's performance in the first half of 2016 was largely in line with our expectation. Its revenue grew 32% compared with the same period last year while EBITDA margin improved to more than 30% (compared with 29% in 2015). The company has remained disciplined in land acquisitions so far this year, spending only about Chinese renminbi (RMB) 1.2 billion on land premiums. Its adjusted debt increased to RMB27 billion as of June 30, 2016, from RMB26 billion as of Dec. 31, 2015.

We expect Powerlong's cash flow and leverage ratios to continue to improve in 2016 as the company increases its sales in top-tier cities with better demand. In addition, the company's rental income will likely grow over 20% each year in 2016 and 2017, given its strong pipeline of new malls, particularly in Shanghai. We forecast the company's debt-to-EBITDA ratio will improve to 5.5x-6.0x over the next 12 months, compared with 7.5x in 2015.