[photopress:moodys_reassures.jpg,full,alignright]Moody’s Investor Services said its ratings on Chinese property developers are unlikely to be affected by a recent Chinese government directive that restricts onshore real estate companies or projects from taking on new foreign debt.
In an internal circular, China’s State Administration of Foreign Exchange (SAFE) indicated it has stopped registering foreign debt for real estate enterprise since June 1, 2007.
Peter Choy, Moody’s senior credit officer said, ‘The primary effect of the decision will be to end the use of cross-border shareholder loans as a means of either injecting or extracting capital from property firms or projects. Accordingly, these developers that rely on foreign debt — in the form of shareholders loans — to directly fund their investments in China could be affected.
Kaven Tsang, a Moody’s analyst said, ‘The measure is not expected to materially and negatively exert a credit impact on rated developers since most have historically relied mainly on registered capital to fund their projects in China.’
He also said Moody’s expects rated developers will have sufficient declared dividends from their profitable operations in China to cover ongoing coupon payments for their foreign bonds.