巴黎人娱乐城

巴黎人娱乐城 - Hong Kong - 02 Dec 2022: 巴黎人娱乐城 has assigned Meixihu Investment (Changsha) Co., Ltd. (MXH) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of 'BBB'. The Outlook is Stable.

巴黎人娱乐城 views MXH as a subsidiary of a policy mission government-related entity, Hunan XiangJiang New Area Development Group Co., Ltd. (XiangJiang Group, BBB/Stable) and has assessed MXH's ratings under our Parent and Subsidiary Linkage Rating Criteria. MXH's 'b' Standalone Credit Profile is assessed under our Public Sector, Revenue-Supported Entities Rating Criteria.

Key Rating Drivers

Stronger Parent: MXH is wholly owned by XiangJiang Group, and MXH's financials are consolidated into those of XiangJiang Group. 巴黎人娱乐城 expects that government support is likely to extend to MXH, as both MXH and the parent have public service roles. We assess that a parent-subsidiary relationship exists between the two entities, and the parent has stronger credit quality.

'High' Legal Incentive: XiangJiang Group guaranteed CNY2.1 billion of MXH's total debt as of June 2022, accounting for 83% of its total debts. The parent has continuously provided guarantees to MXH in the past, with a guarantee ratio of over 50% from 2018 to 2021. XiangJiang Group has stated that it will continue to provide guarantees to MXH while the subsidiary is rated to ensure that the ratio remains over 50%. The cross-acceleration clause of the group's offshore bond covers its subsidiaries, including MXH, but the offshore bond is small (5.4%) relative to the group's total debt.

'High' Strategic Incentive: MXH's financial contribution to XiangJiang Group is 'High', accounting for 25% of its total assets and 57% of net profit as of December 2021. MXH's competitive advantage is 'High', as it assists the parent to execute the Xiangjiang New Area policy mandate. The Meixi Lake area, positioned as the centre of Xiangjiang New Area, has attracted a number of multinational companies, including Tencent Holdings Limited (A+/Stable). The Xiangjiang New Area Management Committee and the parent company's office premises are also located in the Meixi Lake Area.

巴黎人娱乐城 assesses MXH's growth potential as 'Medium'. We expect MXH to maintain its current financial contribution to XiangJiang Group, given that the company has maintained a consistent policy mandate from the sponsoring government in the past.

'High' Operational Incentive: 巴黎人娱乐城 assesses the management and brand overlap of MXH and XiangJiang Group as 'High'. The parent's operational oversight and financial control are tight, and the group uses a centralised cash management approach. We view management decisions as being fully integrated, since all investing and financing activities need to be approved by XiangJiang Group. The group appoints all members of the board of directors, board of supervisors, and key management of MXH, except for the employee director. There are some management overlaps within the group.

We assess operational synergies at 'Medium'. MXH's operations are integral to XiangJiang Group's core business, as they both engage in urban development. The main projects, Meixi Lake Area Phase I and Phase II, have a long construction time horizon, and it could be difficult to find substitutes in the short term. However, the existence of another urban development platform under XiangJiang Group allows the parent to arrange for substitutes gradually. The parent also has its own financing resources to engage directly, if needed.

'b' Standalone Credit Profile: We assess revenue defensibility as 'Weaker' to reflect limited pricing autonomy for MXH's public-welfare business. Operating risk is assessed as 'Midrange' because of well-identified cost drivers and an adequate supply of resources and labour, while MXH's financial profile is assessed as 'Weaker' due to its high leverage. We forecast net adjusted debt/EBITDA to gradually drop to 4.7x in the next five years. MXH's revenue is mainly derived from the primary land development business.

Derivation Summary

MXH shares a strong linkage with its parent company, XiangJiang Group, and its ratings are based on our assessment of a "stronger parent" relative credit quality under 巴黎人娱乐城's Parent and Subsidiary Linkage Rating Criteria. We assess that the parent has 'High' legal, strategic and operational incentives to support MXH. This leads to MXH's ratings being equalised with that of the parent.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

- Positive rating action on XiangJiang Group would lead to an upgrade of MXH, as the subsidiary's ratings are derived from those of XiangJiang Group.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- Significant weakening of XiangJiang Group's legal incentive to support MXH, including less debt guaranteed by XiangJiang Group;

- Dilution in the parent's shareholding;

- Negative rating action on XiangJiang Group would lead to a downgrade of MXH, as the subsidiary's ratings are derived from those of XiangJiang Group.

Best/Worst Case Rating Scenario

International scale credit ratings of Sovereigns, Public Finance and Infrastructure 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 three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit /site/re/10111579.

Issuer Profile

MXH is the only platform responsible for urban development of the Meixi Lake Area of Xiangjiang New Area in Changsha municipality. The company is engaged mainly in primary land development. It is the largest subsidiary under XiangJiang Group by net profits.

Date of Relevant Committee

23 November 2022

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.

Public Ratings with Credit Linkage to other ratings

The ratings of MXH are linked to those of XiangJiang Group.

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 巴黎人娱乐城's ESG Relevance Scores, visit

Additional information is available on

ADDITIONAL DISCLOSURES

• Dodd-Frank Rating Information Disclosure Form
• Solicitation Status
• Endorsement Policy

ENDORSEMENT STATUS