Moody’s downgraded Country Garden to B1, with negative outlook

 

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Moody’s downgraded the Corporate Family Rating (CFR) and senior unsecured rating of Chinese property developer Country Garden to B1 from Ba3, with a negative outlook.

The downgrade reflects weakening forecasts for Country Garden credit metrics and liquidity cushion due to lowered contracted sales, constrained financing, and a large amount of matured debts in the next 12 to 18 months.

As for negative outlook, due to the weak operating environment in low tier cities and the volatile capital market, there is uncertainty on the developer’s ability to stabilize its declining contracted sales and restore its financial channel in the next 6 to 12 months.

Country Garden has recently issued a profit warning, expecting to record a net loss for the first half of the year, compared to a net profit of about 1.91 billion yuan a year earlier. The company attributed the anticipated loss to a lower gross profit margin from the real estate business, an increase in the provision of impairment for property projects and net foreign exchange losses.

In response media reports that Country Garden intended to raise $300 million through a primary placement to repay debt but cancelled the offering, the company said that it’s not considering the proposed transaction at this stage.