Signage at the Intercontinental Shanghai Wonderland hotel, developed by Shimao Group Holdings, in Shanghai, China, on February 9, 2022.
Qilai Shen | Bloomberg | beautiful pictures
BEIJING – Chinese property developer downgraded by Moody’s Shimao Group Holdings on Wednesday based on expectations that the company would find it difficult to repay investors on time.
The move reflects ongoing troubles in China’s huge property sector, despite announcements by local governments over the past few weeks to encourage more homebuyers.
Moody’s downgraded Shimao two notches, to Caa1 from B2 – both in the “non-investment” category. The rating agency’s outlook for the developer is currently negative, concluding a ratings review that began on January 10.
Shimao was once considered one of the healthiest real estate developers in China as it has met all of Beijing’s requirements for debt, unlike the Evergrande. Worries among global investors over the past year have centered on whether Evergrande can repay its debt and the potential spillover to the Chinese economy if it fails to do so.
But like other real estate developers, Shimao has since exposed its own debt problems.
The company was reported to have defaulted in early January, and its outlook for future earnings has dipped. Contractual revenue for 2021 fell 10.4% year-on-year to 269.11 billion yuan ($42 billion).
Moody’s expects sales to fall “significantly” this year and next. Any cash Shimao has will most likely be used to pay off project-grade debt and construction costs, leaving investors with insufficient funds this year.
At the parent company level, Shimao has large debts that are due or payable by the end of 2022, including foreign bank loans, offshore bonds totaling worth about $1.7 billion and domestic bonds about 6.9 billion yuan.” One issue.
Auditor resigns
Among other negative headlines surrounding property developers like Shimao, S&P Global Ratings said last week that the auditors for Shimao’s mainland China subsidiary, Hopson Development Holdingsand China Aoyuan Group all resigned at the end of January.
Edward Chan, director of S&P Global Ratings, said in a phone interview on Monday that it is quite rare for Hong Kong-listed developers to resign.
Chan said that a delay in filing could result in a suspension of stock trading. “So that would obviously further undermine investor confidence.”
Shimao’s Hong Kong-traded shares are up 12% in January after months of selling, but are down more than 6% in February so far. Aoyuan stock also ended a months-long sell-off with a 10% gain in January, but the stock has fallen about 7% this month.
Hopson stock is down slightly this month after falling 1% in January.
