Chinese Developer Faces Heightened Liquidity Risk After Bond Payment Miss
Ratings agency Moody’s has downgraded Chinese developer Country Garden’s corporate family rating (CFR) from B1 to Caa1 due to increased liquidity and refinancing risk following missed bond payments.
The Caa1 rating signifies a very high credit risk. Country Garden, the largest privately owned developer in China, expects a half-year loss due to elevated impairment provisions on projects.
Moody’s forecasts a negative outlook for Country Garden, expressing uncertainty over its debt servicing ability. The company missed two dollar bond coupon payments, totaling $22.5 million, leading to repayment troubles.
The ratings agency also revised down its 2023 contracted sales projection, reflecting concerns over liquidity and financial stability.
Moody’s noted that the company is likely to rely more on secured debt due to declining credit quality, resulting in a lower expected recovery rate for senior unsecured claims.
This downgrade comes amidst a series of debt defaults in China’s property sector, with China Evergrande Group at the forefront of the crisis. Heightened contagion worries over Country Garden’s liquidity concerns have contributed to volatility in Chinese property shares.
Investors are closely observing policymakers for potential sector support in light of these developments.