LONDON: Moody’s downgraded China’s second-largest personal property agency Longfor‘s credit score ratings to Baa3, the bottom rung of funding grade, on Friday and put it “on review” for an additional downgrade.
“The rating downgrade reflects our expectation that Longfor’s credit metrics and liquidity buffer will decline amid slowing contracted sales, continual margin pressure and still constrained funding access to the debt capital markets,” stated Kaven Tsang, a Moody’s senior vice chairman.
“The review for (another) downgrade reflects high uncertainties over the company’s ability to improve its operating performance and recover its access to funding amid uncertain market prospects and volatile funding conditions”.
China’s property market has suffered a wave of defaults and debt restructurings since mid-2021 which have additionally left swathes of properties unfinished, undermining the arrogance of each homebuyers and traders.
Beijing-based Longfor was one of the massive privately-owned builders concerned in a gathering with prime Chinese regulators early this month and stated not too long ago that it felt it had the help from policymakers to meet its “reasonable financing needs”.
Last week it reported a 35% hunch in income from a 12 months earlier a giant decline in money protection on quick-time period debt to 1.27 instances. At the identical time it stated it will try to increase its profitability because it posted a 0.6% rise in first-half core revenue.
Moody’s expects Longfor’s full-12 months contracted gross sales to decline by round 10% to roughly 180 billion yuan ($24.7 bln) in 2023 from 202 bln yuan ($27.7 bln) in 2022 as a result of of “weaker market sentiment and homebuyers’ increased risk aversion.”
The ranking company stated it may downgrade the agency’s ratings whether it is “unable to recover its access to funding and strengthen its contracted sales”.
They would additionally come “under pressure” if the agency pursued “aggressive financial management, resulting in a deterioration in its financial metrics and liquidity.”
Moody’s estimates that the agency may have round 12 billion yuan ($1.65 billion) of Chinese home ‘onshore’ market bonds “maturing or becoming puttable” between now and the top of 2024.
“The rating downgrade reflects our expectation that Longfor’s credit metrics and liquidity buffer will decline amid slowing contracted sales, continual margin pressure and still constrained funding access to the debt capital markets,” stated Kaven Tsang, a Moody’s senior vice chairman.
“The review for (another) downgrade reflects high uncertainties over the company’s ability to improve its operating performance and recover its access to funding amid uncertain market prospects and volatile funding conditions”.
China’s property market has suffered a wave of defaults and debt restructurings since mid-2021 which have additionally left swathes of properties unfinished, undermining the arrogance of each homebuyers and traders.
Beijing-based Longfor was one of the massive privately-owned builders concerned in a gathering with prime Chinese regulators early this month and stated not too long ago that it felt it had the help from policymakers to meet its “reasonable financing needs”.
Last week it reported a 35% hunch in income from a 12 months earlier a giant decline in money protection on quick-time period debt to 1.27 instances. At the identical time it stated it will try to increase its profitability because it posted a 0.6% rise in first-half core revenue.
Moody’s expects Longfor’s full-12 months contracted gross sales to decline by round 10% to roughly 180 billion yuan ($24.7 bln) in 2023 from 202 bln yuan ($27.7 bln) in 2022 as a result of of “weaker market sentiment and homebuyers’ increased risk aversion.”
The ranking company stated it may downgrade the agency’s ratings whether it is “unable to recover its access to funding and strengthen its contracted sales”.
They would additionally come “under pressure” if the agency pursued “aggressive financial management, resulting in a deterioration in its financial metrics and liquidity.”
Moody’s estimates that the agency may have round 12 billion yuan ($1.65 billion) of Chinese home ‘onshore’ market bonds “maturing or becoming puttable” between now and the top of 2024.
