S&P Gives Greenland Negative Outlook, Rating Pulled

Chinese developer Greenland Holding has seen its credit rating rise after winning extensions on its offshore bonds, but S&P Global on Wednesday said the Shanghai-based builder will struggle to pay off its liabilities even with two extra years to pay back its dollar notes.

S&P hiked its long-term issuer credit rating for Greenland to CCC- from SD (selective default) and also raised the long-term issue rating on the Greenland-guaranteed senior unsecured notes to CC from D. But the company subsequently withdrew the ratings at Greenland’s request, adding to the long roll call of mainland property firms having their coverage dropped.

Judging that Greenland’s liquidity for repaying holding company debt has been depleted as it prioritises project completions, S&P also gave the Shanghai government-backed builder a negative outlook.

“Furthermore, the company faces heightened repayment pressure owing to material onshore bond and offshore loans coming due in 2023,” the agency said.

Slowing Sales, Asset Disposals

Greenland has onshore bond maturities of RMB 7.2 billion ($1 billion) due by the end of 2023, of which RMB 6.3 billion is due in the next six months, according to S&P. The company also has offshore loans due next year in the amount of RMB 2.5 billion.

Before withdrawing its ratings, S&P gave a negative outlook to Greenland in light of the developer facing heightened risk in raising fresh liquidity from project sales and asset disposals to meet debt obligations over the next six months. The company’s contracted sales in the first nine months of 2022 fell 57 percent year-on-year to RMB 99 billion.

The group led by founder and chairman Zhang Yuliang got some good news on the disposal front last month with the sale of a 59-storey Los Angeles residential tower, the centrepiece of Greenland’s first-ever US project, to American apartment operator Northland for $504 million.

The price represented a more than 27 percent discount to the $695 million that Greenland had been asking for the tower as recently as 18 months earlier, according to an account in the Wall Street Journal.

Cutting Ties

The last few months have seen a bevy of Chinese property firms lose ratings coverage, including the world’s most indebted developer, China Evergrande. Moody’s Investors Service yanked the Shenzhen-based builder’s ratings in October, citing “insufficient or otherwise inadequate information to support the maintenance of the ratings”.

Later that same month, Moody’s withdrew its ratings of Guangzhou R&F Properties for what it described as “its own business reasons”, while Fosun International terminated its own relationship with the agency.

Also in October, Fitch Ratings announced that it was withdrawing its rating for CIFI Holdings at the developer’s request, stating that it would no longer have access to information regarding the company’s financials.