OREANDA-NEWS. Fitch Ratings says today that ratings on China South City Holdings Limited (CSC; B/Stable) and its bonds due in 2019 will not be affected even if the proposed amendments in the consent solicitation announced on 16 March 2016 are adopted.

The principal purpose of the consent solicitation is to give the company more flexibility in offshore and onshore debt-raising, investments in associates and Tencent joint ventures, dividend payouts and stock repurchases, as well as business diversification beyond its core real estate development business.

The proposed amendments, if adopted, will provide CSC with more funding and operational flexibility to support its current expansion and business diversification, though it would require a higher level of indebtedness. Fitch does not expect its view on CSC to change solely due to the adoption of the proposed amendments. However, CSC's rating may come under pressure in the event that faster expansion drives leverage (as measured by net debt/adjusted inventory) to above 50% on a sustained basis.

Major proposed amendments of the indentures include:
- Lowering the fixed-charge coverage ratio requirement to not less than 2.50x from not less than 3.00x;
- redefining certain terms including "Consolidated Net Income", "Consolidated Interest Expense", which may result in an increase in its fixed-charge coverage ratio;
- increasing the purchase money indebtedness basket from 20% to 35% of total assets;
- increasing the limit on permitted subsidiary indebtedness from 15% to 30% of total assets;
- allowing the company to have more flexibility in dividend payout and share repurchase;
- loosening permitted investment provisions with regards to investments in associates and Tencent joint ventures;
- increase "Cross Default" threshold from USD7.5m to USD15m;
- amending the definition of "Permitted Business" to businesses including but not limited to internet financing, micro-finance, international products sourcing and cultural, entertainment or marketing-related businesses.

For a more detailed discussion on CSC's rating, see "Fitch Downgrades China South City to 'B' from 'B+', Outlook Stable" dated 22 January 2016 at www.fitchratings.com.