S&P cuts Country Garden

S&P said it lowered Country Garden Holdings Co. Ltd.’s issuer rating to BB from BB+.

“We lowered the rating to reflect Country Garden's narrowing liquidity buffer due to weakened sales and a high amount of construction expenditure. Softening sales will be the key risk to Country Garden's liquidity, in our view. We expect the company's construction expenditure to remain higher than peers' given its lower-tier city exposure with low land costs. Based on our forecast, such expenditure will account for 60% of the company's contracted sales,” S&P said in a press release.

The agency said it projects Country Garden’s leverage, as measured by the consolidated debt-to-EBITDA ratio, to grow to 5.2x in 2022 and 2023, from 3.7x in 2021.

The outlook is negative.

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