Fitch downgrades Long-term Issuer rating to ‘B’ on Limited financing access

2022-05-22 0 By

Fitch downgraded the long-term issuer default rating (IDR) of Zhenro Properties Group Limited (” Zhenro Properties “) to “B” from “B+” and the senior unsecured rating to “B” from “B+” with a recovery rating of “RR4” on Feb. 15.The rating has been placed on negative rating watch (RWN).The company announced in January 2022 that it would redeem $200 million of perpetual notes on March 5, subject to a 5% coupon increase from January 2022, viewpoint New Media learned.However, since the announcement, there has been speculation that Zhenro might not redeem, and the company has not responded specifically.The negative rating watch reflects the possibility of further negative rating actions by the Company in the light of further deterioration in its liquidity and access to financing, inability to cope with upcoming capital markets debt maturities and/or continued substantial declines in contract sales.Fitch believes that The access to capital markets is limited and the company has a high proportion of non-controlling interests, which rose to 56% of total equity in the first half of 2021 from 46% in 2020, and may mainly rely on cash generated from contract sales to repay capital market maturing debt in 2022.Separately, the company has about 8.8 billion yuan of capital market debt maturing or salable in 2022, including $50 million in March, $217.5 million in April, $1.6 billion in June, $293 million in August, $246.5 million in September, and 1 billion yuan in onshore bonds that can be sold in September.November’s Rmb1.05bn in onshore bonds.The company hasn’t disclosed to Fitch how much cash it has available on hand to repay capital markets debt.It is understood that Zhenro Real estate was listed on the Hong Kong Stock Exchange in 2018, and its major shareholder Ou Zongrong’s real estate development business began in 1998.As of the end of June 2021, The total size of Zhenro’s land bank was 29.3 million square meters, and the company’s 230 real estate projects are mostly located in first-tier and second-tier cities.Source: Viewpoint