China Vanke debt downgraded to ‘junk’ status by Moody’s as liquidity concerns mount amid tumbling property sales
- The developer would have to offer discounts to strengthen its sales during the downcycle, which would weaken its profit margin, the ratings agency said
- Investors have been dumping shares and bonds of Vanke in recent weeks amid reports the developer was seeking debt maturity extension with some insurers
Moody’s Ratings withdrew China Vanke’s “Baa3” issuer rating, replacing it with a “Ba1” corporate family rating, which judges the debt obligations of the parent corporation and its subsidiaries to be “speculative and subject to substantial credit risk”.
Moody’s also downgraded the bonds and medium-term notes of Vanke Real Estate, a subsidiary.
“The rating actions reflect Moody’s expectation that China Vanke’s credit metrics, financial flexibility and liquidity buffer will weaken over the next 12-18 months because of its declining contracted sales and the rising uncertainties over its access to funding amid the prolonged property market downturn in China,” said Kaven Tsang, a senior vice-president at Moody’s.
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The downgrade comes as investors have been dumping shares and bonds of Vanke over the past few weeks on liquidity concerns, amid reports that the developer, previously seen by the market as financially sound, was seeking debt maturity extension with some insurers.
