Bond Market News

Country Garden (COGARD) was downgraded to B+ from B by S&P reflecting “narrowing funding channels” for the developer. S&P then withdrew its ratings for COGARD upon the developer’s request. Given the weak market sentiment for property developers, S&P said that COGARD will need to “rely heavily on internal resources” to pay its upcoming bond maturities, hurting its RMB 77bn ($10.6bn) cash buffers. Thus, it now views the company’s liquidity as less than adequate, from adequate previously. Also, COGARD’s high exposure to lower-tier cities, at 66 % of its salable resources could lead to weaker sales performance. S&P also expects COGARD’s contracted sales to decline further by 4-5% which could impact its leverage with its debt-to-equity ratio touching 5.8-5.9x.

COGARD’s dollar bonds were trading stable at 11-12 cents on the dollar.