What’s new: Real estate giant Country Garden Holdings Co. Ltd. withdrew from S&P Global Ratings’ credit rating after a downgrade and following discussions with S&P, China’s largest property developer by sales said.
S&P lowered its long-term issuer credit rating Tuesday on Country Garden to B+ from BB, citing weaker confidence in China’s private real estate companies, Country Garden’s narrowed financing channels and possible deterioration of the developer’s liquidity amid weakening sales.
After the rating cut, Country Garden said the company’s fundamentals have not changed significantly, its sales are stable to positive, and it completed a domestic refinancing in September.
The developer said it voluntarily withdrew from S&P’s rating because the reduced score reflected S&P’s pessimistic expectations and negative evaluation of the industry and did not fairly reflect the true credit status of the company.
The rating adjustment and withdrawal will not trigger accelerated repayment of the company’s outstanding debt and will not adversely affect its solvency and financing ability, Country Garden said.
The background: Credit rating companies usually withdraw an assigned credit rating either because of incorrect or inadequate information or if a borrower defaults, enters bankruptcy, is liquidated, or restructures its debt, or for other business reasons that do not reflect concerns about the company’s creditworthiness.
Country Garden is still rated by other two major global credit rating businesses, Moody’s Investors Service and Fitch Ratings.
Fitch downgraded Country Garden’s long-term foreign- and local-currency issuer default ratings (IDRs), senior unsecured rating and the rating on outstanding bonds Oct. 31 to BB- from BB+ with a negative outlook. Moody’s also cut Country Garden’s rating to Ba1 from Baa3 in June.
Country Garden is one of the few Chinese private property companies that have not defaulted on debt. Consistent, relatively safe ratings from the three big rating companies are almost a requirement for companies to sell debt overseas, a real estate industry participant told Caixin.
Since the second half of 2021, about 70 Chinese developers have applied to the three major rating companies to withdraw from their ratings to avoid the risk of downgrades.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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