Fitch cuts Country Garden

Fitch Ratings said it downgraded Country Garden Holdings Co. Ltd.'s long-term foreign- and local-currency issuer default ratings, senior unsecured ratings, and the rating on the outstanding bonds to BB+ from BBB-. All ratings remain on rating watch negative.

“The downgrade reflects a weakening in Country Garden's financial flexibility due to challenges in China's property sector. Fitch believes that Country Garden's liquidity buffer, while adequate, is under pressure as declining sales coupled with working capital commitments put pressure on cash generation, while deterioration in capital market conditions has narrowed the company's funding sources,” the agency said in a press release.

However, Fitch said it sees the pressure on Country Garden’s cash flow easing towards the second half of 2023.

Country Garden has $440 million of syndicated loans due in December and $617 million of offshore bonds due in January. “We expect the company to repay these borrowings, as it did with the $693 million of bonds that matured in July, as offshore debt issuance remains curtailed. It completed a HK$2.8 billion share placement in August 2022 and a $500 million in convertible bond issuance in January 2022,” Fitch said.

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