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Bond Market News
Longfor Downgraded to BB by Fitch
October 24, 2024
Longfor Group has been downgraded by a notch to BB from BB+ by Fitch. The downgrade reflects Longfor’s reduced liquidity buffer due to weaker sales and cashflow generation. Longfor’s liquidity buffer has decreased due to a 48% drop in contracted sales in 1H2024, with available cash-to-short-term debt falling to 1.6x from 3.1x at end-2023. Longfor’s contracted sales continued to decline, with a 43% YoY decrease in 3Q2024 to RMB 22bn ($3.1bn). Forecasts predict that 2024 sales will drop to RMB 100bn ($14.1bn), down from RMB 140bn ($19.7bn), and 2025 sales may fall another 10% to RMB 90bn ($12.7bn), reflecting uncertain market conditions despite government support. Longfor is increasing its reliance on IP-backed loans to manage maturing debts. This shift to secured borrowing has extended the maturity profile and eased liquidity pressures, although it reduces unencumbered assets and may pose risks for offshore debts. In terms of debt maturities, Longfor faces RMB 29bn ($4.1bn) in maturities in 2025.
Its dollar bonds traded stable with its 3.375% 2027s at 84.25, yielding 10.84%.
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