COGARD Downgraded to Ba3; Central China Real Estate Missed Coupon on 2023s; Longfor Gets ~$2.8bn Debt Issuance Approval

Country Garden was downgraded to Ba3 from Ba2 by Moody’s. The developer’s liquidity buffer is set to reduce further as it has to use its internal resources to repay maturing debts in the next 1-1.5 years where it has ~RMB 43bn ($6.1bn) in onshore and offshore bonds. COGARD’s high exposure to lower-tier cities could lead to weaker sales and shrink profit margins. COGARD’s EBIT/interest coverage is expected to decrease to 2.5-2.8x over the next 1-2 years from 3.7x ending June 2022. Meanwhile, debt/EBITDA is expected to rise to 6.5-7.0x from 5.0x. Moody’s notes that the developer raising RMB 1.5bn ($mn) via state-backed bonds will provide additional liquidity to it. The developer was downgraded by S&P and Fitch to B+ and BB- and subsequently saw its ratings get withdrawn in the last few weeks.

COGARD’s dollar bonds were up over 6-8 points to trade at ~20 cents on the dollar after the 16-point plan by China was revealed to support property developers. 

Central China Real Estate (CCRE) missed paying the coupon on its $200mn 7.9% 2023s which was due on November 7. The developer however said that it plans to make the payment within the 30-day grace period, as per Fitch. CCRE’s dollar bonds were trading flat at 7-10 cents on the dollar.