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Bond Market News

Moody’s Downgrades Sino-Ocean, Road King and Seazen

Chinese developers Sino-Ocean, Road King and Seazen were downgraded by Moody’s yesterday:

  • Sino-Ocean was downgraded to Ba3 from Ba2 on the back of a weak credit profile, due to “weak operating performance, low profit margins and reduced financial flexibility”. Its gross margins are set to fall to 12-13% from 18% in 1H 2022. Besides, offering discounts to support contracted sales will further pressure the company. Interest coverage is expected to weaken to 2-2.1x from 2.9x. 
  • Road King was downgraded to B1 from Ba3 due to its “weak credit metrics and decline in operating scale”. Road King’s contracted sales are expected to fall by 10% in 2023 after an 18% drop in 2022. This will weaken its operating cash flow and credit metrics over the next 1 year. Interest coverage is expected to weaken to 2.1x from 2.4x. Besides, Moody’s expects revenues to drop “significantly” and profit margins “marginally”. Also, its liquidity buffer is expected to drop as the company repays debt.

  • Seazen Group was downgraded to B1 from Ba3 upon weak contracted sales and market position coupled with expectations for worse credit metrics. Contracted sales are expected to fall by 15% in 2023 after a 50% drop last year, weakening its cash flows and credit metrics over the next 1 year. Interest coverage is expected to weaken to 2.2-2.4x from 3.2x. Liquidity however will remain adequate, Moody’s noted.

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