Fitch Ratings downgraded the credit rating on Country Garden Services to junk grade citing “heightened liquidity pressure” and signalled potential further downgrades.
The Long-Term Issuer Default Rating (IDR) on Country Garden Services was downgraded from “BBB-” to “BB+”, equivalent to junk grade (non-investment level), and was placed on Rating Watch Negative (RWN), the rating agency said.
Country Garden Services’ “growth, brand reputation, profitability and funding access may be negatively affected by the heightened liquidity pressure” faced by its parent company Country Garden, Fitch said.
Country Garden, China’s largest private developer in terms of sales last year, has amassed more than $150 billion in debt and said this month it had failed to make two bond payments, meaning it now risks a default.
The firm’s cash flow woes have fuelled fears that the firm could collapse, which many warn could have catastrophic repercussions for the Chinese financial system and economy.
Country Garden is expected to publish its results for the first half of the year in the coming days and has said it expects a net loss of up to 55 billion yuan ($7.5 billion).
