by laflammaster
Fitch downgrades Zhongliang from B- to C, Redco from C to RD, withdraws Guorui after downgrading from CCC+ to RD, KWG from B+ to B, Seazen Group from BB+ to BB.
Fitch Ratings – Hong Kong – 29 Apr 2022: Fitch Ratings has downgraded China-based homebuilder Zhongliang Holdings Group Company Limited’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘C’ from ‘B-‘ and the senior unsecured rating on Zhongliang’s outstanding US dollar senior notes to ‘C’ from ‘B-‘, with the Recovery Rating remaining at ‘RR4’.
The downgrades follow Zhongliang’s announcement that it has launched an exchange offer and consent solicitation (the transaction) to exchange USD290 million of bonds outstanding due on 19 May 2022 and USD440 million bonds outstanding due on 9 July 2022 for bonds due in April 2023 and December 2023.
Fitch considers the effective extension of the bond maturity by nine to 19 months as a distressed debt exchange (DDE) as per Fitch’s criteria, although there is an incentive fee offered and no reduction in principal and interest. If the proposed transaction is successfully completed, the IDR will be downgraded to ‘RD’ (Restricted Default). Fitch will then reassess Zhongliang’s credit profile to determine an IDR consistent with the company’s post-transaction capital structure and risk profile, which would likely be within a very low speculative-grade range.
Fitch Ratings – Hong Kong – 22 Apr 2022: Fitch Ratings has downgraded the Long-Term Foreign-Currency Issuer Default Rating (IDR) on China-based homebuilder Redco Properties Group Ltd to ‘RD’ (Restricted Default) from ‘C’ on completion of its exchange offer, which Fitch considers a distressed debt exchange (DDE).
Fitch then upgraded the Long-Term Foreign-Currency IDR to ‘CCC-‘ from ‘RD’ due to a reassessment of the company’s profile after the completion of the exchange offer. The senior unsecured ratings have also been upgraded to ‘CCC-‘ from ‘C’ and the Recovery Ratings remain at ‘RR4’.
The upgrade to ‘CCC-‘ reflects Redco’s improved capital structure after the completion of the DDE on 8 April 2022, which extended the bond maturities by nine to 12 months. However, Fitch believes the company continues to face liquidity challenges as around CNY4.5 billion of offshore bonds are maturing in 2023, while its access to offshore bond funding could remain limited. A persistent drop in contracted sales could continue to weaken the company’s ability to repay debt, as cash collected from contracted sales is a key source of Redco’s liquidity.
Fitch Ratings – Hong Kong/Shanghai – 25 Apr 2022: Fitch Ratings has downgraded China-based homebuilder Guorui Properties Limited’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘RD’ (Restricted Default) from ‘CCC+’. Fitch has also downgraded Guorui’s senior unsecured rating to ‘C’ from ‘CCC+’, with the Recovery Rating maintained at ‘RR4’.
The rating downgrade follows Guorui’s non-payment of the principal of USD4.9 million on its senior notes due 27 February 2022. There is no grace period for the principal repayment.
As the same time, Fitch is withdrawing Guorui’s ratings as company has chosen to stop participating in the rating process. Therefore, Fitch will no longer have sufficient information to maintain the ratings. Accordingly, Fitch will no longer provide ratings or analytical coverage for Guorui.
www.fitchratings.com/research/corporate-finance/fitch-downgrades-withdraws-guorui-ratings-25-04-2022
Fitch Ratings – Hong Kong/Shanghai – 22 Apr 2022: Fitch Ratings has downgraded Chinese homebuilder KWG Group Holdings Limited’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B’ from ‘B+’, and senior unsecured rating to ‘B’ from ‘B+’, with the Recovery Ratings remaining at ‘RR4’. The ratings remain on Rating Watch Negative.
The downgrade follows declining liquidity and financial flexibility amid high capital-market volatility, and the increase in KWG’s leverage to above 50%, the level at which Fitch would consider negative rating action.
The Rating Watch Negative reflects uncertainty over the company’s near-term offshore refinancing plan.
Fitch Ratings – Hong Kong – 27 Apr 2022: Fitch Ratings has downgraded China-based homebuilder Seazen Group Limited’s (SGL) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘BB’ from ‘BB+’ and the Long-Term Foreign-Currency IDR on SGL’s 67%-owned subsidiary Seazen Holdings Co., Ltd. (SHCL) to ‘BB’ from ‘BB+’. The Outlooks are Negative. Fitch has also downgraded their outstanding bonds and senior unsecured ratings to ‘BB’ from ‘BB+’. Fitch has removed the Rating Watch Negative on all the ratings.
The downgrade reflects Fitch’s view that the financial flexibility for SGL and SHCL (collectively Seazen) has deteriorated amid concentrated debt maturities. The companies collectively have CNY11 billion of bonds and offshore syndicated loans due in 2022. The company also did not issue a previously expected capital-market instrument.
The Negative Outlook reflects the pressure on Seazen’s sales from Covid-19-related social restrictions in China, which may persist and could further undermine its liquidity.
Seazen’s ratings are supported by its large CNY150 billion in annual attributable sales, sufficient land bank and moderate leverage of 42% in 2021. Fitch believes Seazen’s liquidity remains adequate. It continues to have strong access to bank loans and an investment-property portfolio that can generate CNY10 billion in recurring income, providing it with alternative funding options, including secured loans.