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Bond Market News
Sunac Downgraded Three Notches and Ronshine by One Notch to Caa1 each by Moody’s
March 23, 2022
Sunac China was downgraded three notches to Caa1 from B1 with a negative outlook, reflecting heightened liquidity and refinancing risks. Similar to Ronshine, Moody’s believes that the announcement of a delay in its annual 2021 financials weighs on its transparency and information disclosure and thereby hurt its funding access. Deteriorating operations, constrained funding and lower buffers have weakened its liquidity. Sunac’s unrestricted cash is set to have declined markedly in the January and February 2022, following a sharp drop in H2 2021. This was due to ongoing debt repayments, weak contracted sales, settlement of other obligations, and more stringent restrictions of its escrow accounts. It has offshore bonds of ~$1.9bn and onshore bonds of ~RMB 21bn ($3.3bn) before June 2023. It could face an acceleration of its offshore borrowings, Moody’s notes.
Ronshine China was downgraded to Caa1 from B3 with a negative outlook, reflecting increased liquidity and refinancing risks. This comes on the back of changing its auditor and a likely delay in reporting its 2021 annual financials. Ronshine announced the resignation of PwC as its auditor and appointed Elite Partners CPA Ltd as its new auditor. Moody’s believes it raises governance concerns and thereby likely worsen its already weak funding access. Further, uncertainty regarding meeting its debt maturities over the next 6-12 months also weighs on its risks.
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