Integrated logistics and trade center operator China South City (CSC) was downgraded to B- from B by S&P due to slowing cash generation and increased refinancing risk amid tough capital market conditions. While CSC has taken steps to sell non-property development assets and obtain additional domestic bank financing, progress has been insufficient, due to its large upcoming debt maturities. It has three significant offshore maturities due in February, June, and November 2022 totaling $970.5mn, or 20% of its total debt as of end-September 2021. Therefore CSC would have to rely on asset sales and bank funding to enhance liquidity, but execution risks remain. S&P expects CSC to manage its bond maturities over the next 12 months with a large portion of its HKD 6.6bn ($850mn) unrestricted cash and deposit balances end-September being accessible for debt repayment. However, slowing sales (contracted sales falling 31% YoY from July-September 2021) will hurt its liquidity.
CSC’s dollar bonds were trading stable with its 7.25% 2022s at 41.4 cents on the dollar.
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