Moody’s slices China Vanke

Moody’s Ratings said it downgraded China Vanke Co. Ltd.’s corporate family rating to Ba3 from Ba1 and the backed senior unsecured ratings of its wholly owned subsidiary Vanke Real Estate (Hong Kong) Co. Ltd.’s medium-term note program to (P)B1 from (P)Ba2 and its backed senior unsecured notes to B1 from Ba2.

The agency also revised the outlook for the companies to negative from under review for downgrade.

"The rating downgrades and negative outlooks reflect our expectation that China Vanke's credit metrics and liquidity buffer will further decline over the next six to 12 months and weakly position it at the Ba level. This weakening reflects the company's continuing decline in contracted sales, constrained access to unsecured financing and sizable refinancing needs," said Kaven Tsang, a Moody's senior vice president, in a press release.

Moody’s said it forecasts China Vanke's EBIT/interest to drop towards 2.5x over the next 12-18 months from 4.3x in 2023, and its adjusted debt/EBITDA to climb towards 7x from 4.6x over the same period.

"We expect China Vanke will increasingly rely on secured borrowings at the project level, and while this provides it with the necessary liquidity to refinance its unsecured debt, it will also reduce its financial flexibility," Tsang added.

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