Sino-Ocean and its senior unsecured notes were downgraded to Ba2 from Ba1 by Moody’s while its perps were cut to B1 from Ba3. The developer’s credit profile has weakened and its funding access has deteriorated, they said. Besides, the company’s financial flexibility has reduced due to its increasing pledge of assets for financing and use of internal cash to repay maturing debt. Moody’s forecasts Sino-Ocean’s contracted sales will decline to around RMB 100bn ($14.4bn) in 2022 and RMB 92bn ($13.3bn) in 2023, vs. RMB 136bn ($19.6bn) in 2021. Contracted sales fell 17% YoY in the period from January-July 2022. However, Moody’s expects the company’s liquidity to be adequate over the next 12-18 months. Its unrestricted cash balance has dropped 32% from end-2021, to RMB 14.6bn ($2.1bn) as of end-June 2022. Moody’s added that Sino-Ocean would likely offer price discounts to support its contracted sales which will pressure its profit margins to 16% over the next 12-18 months from 19% in 1H 2022.
Sino-Ocean’s dollar bonds are trading at 36-44 cents on the dollar.