Fitch has downgraded Chinese real estate company Sino-Ocean from BBB- to BB+. The rating agency expects the company’s leverage, measured by net debt/net property assets, to remain above 50% for the next two years. The Chinese property sector is under heavy financial stress, affecting the company’s deleveraging plan by weaker sales proceeds and continued capital injections into its JV (Joint Venture) projects. Net receivables from JVs, rose by RMB 18.5bn ($2.7bn) in 2H 2021. As per Fitch, the company has RMB 7.5bn ($1.1bn) due by 1H 2023 weak access to refinancing. Its continuous debt repayment with cash can deteriorate its liquidity buffer and financial flexibility. In 2022, Sino-Ocean raised $400mn by issuing notes and secured a loan of HKD 1.6bn ($180mn) in June. Fitch expects that due to mortgage boycotts by the public in China and liquidity concerns in the real estate sector, Sino-Ocean’s offshore funding access in the medium term has been affected. While the company’s contracted sales till July fell 17% YoY to RMB 52bn ($7.6bn), it was better than other developers whose sales fell 30-40%. The rating agency believes Sino-Ocean will benefit from its parent insurer China Life which already invested in its onshore and offshore bonds, contributed to asset acquisitions, and given secured loans.
Sino-Ocean’s 4.9% Perp traded lower 0.75 points to 21.11 cents to dollar.
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