Moody’s downgrades Forest City’s parent Country Garden to ‘junk’ status


Shazni Ong/
June 22, 2022 23:58 pm +08

KUALA LUMPUR (June 22): Moody’s Investors Service has assigned a Ba1 corporate family rating (CFR) to China-based Country Garden Holdings Co Ltd and withdrawn its Baa3 issuer rating, as well as downgraded the company’s senior unsecured rating to Ba1 from Baa3.

In a statement on Wednesday (June 22), Moody’s has also downgraded the rating outlook on Country Garden to negative from “ratings under review”, and noted further that this concludes the review for downgrade initiated on May 30 this year.

“The rating downgrade reflects Country Garden’s declining property sales and deteriorating financial metrics amidst the challenging operating conditions of the China property sector, as well as its weakened access to long-term funding,” said Moody’s senior vice president Kaven Tsang in a statement.

“While Moody’s expects Country Garden to maintain a strong market position and good liquidity, the negative outlook reflects Country Garden’s reducing liquidity buffer and financial flexibility, driven by falling property sales and continued weak market sentiment in the next six to 12 months,” said Tsang.

It is Country Garden’s second junk-level rating from major international credit assessors. S&P Global Ratings hasn’t deemed the developer investment grade since 2008, according to data compiled by Bloomberg.

Country Garden’s Malaysian unit Country Garden Real Estate Sdn Bhd (CGRE) is the developer for Forest City in Johor, with the 50%-60% of the cost funded by the parent, The Edge Weekly (Sept 27-Oct 3, 2021 edition) quoted a former CGRE official as saying.

Notably, CGRE has an outstanding sukuk amounting to RM870 million from its RM1.5 billion Islamic Medium-Term Notes (IMTN) programme, with the earliest maturity on July 26 this year, for a RM60 million tranche.

In a statement on Oct 21 last year, RAM Ratings reaffirmed the AA3(s)/Stable rating of CGRE’s RM1.5 billion IMTN programme (2015/2035).

The rating agency had said the rating reflected unconditional and irrevocable corporate guarantees extended by CGRE’s ultimate parent — Country Garden — and the latter’s subsidiaries, Bright Start Group Ltd and Top Favour Holdings Ltd.

“As the guarantees are provided on a joint and several basis, the rating mirrors the credit strength of Country Garden (as the strongest obligor),” said RAM Ratings then.

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