SHANGHAI/HONG KONG—Shimao Group Holdings Ltd. was downgraded by rating agencies Moody’s and Fitch on Friday, both by two notches, due to the Chinese developer’s increased financing risks.
The downgrades could trigger some creditors to demand immediate repayment, market watchers cautioned, further pressuring Shimao’s liquidity.
Separately, S&P downgraded China Evergrande Group to “selective default” on Friday, and Moody’s and Fitch downgraded Guangzhou R&F Properties to Caa2 from B3, and C from B-, respectively.
Evergrande, which has more than $300 billion in liabilities, missed a debt payment deadline last week, putting the developer at risk of becoming the country’s biggest defaulter. Fitch has already downgraded the developer to “restricted default.”
Chinese developers are facing an unprecedented liquidity squeeze due to regulatory curbs on borrowing, causing a string of offshore debt defaults, credit-rating downgrades, and sell-offs in developers’ shares and bonds.
On Friday, Moody’s downgraded Shimao’s corporate family rating (CFR) to Ba3 from Ba1, while Fitch cut its Issuer Default Rating (IDR) to BB from BBB-, both on review for further potential downgrade.
“The rating downgrade reflects Shimao’s increased refinancing risk due to its constrained funding access and sizeable debt maturities over the next 6–12 months,” Moody’s said in a statement.
In 2022, Shimao will have $1.7 billion maturities offshore and 8.9 billion yuan (about $1.40 billion) onshore, according to Moody’s.
Shimao saw sharp falls in its shares and debt earlier this week, triggered by worries over an asset sale and cancelled apartment deals.
Fitch said the related negative news flow has diminished investor confidence, which could constrain Shimao’s refinancing channels and add to liquidity pressure.
Earlier in the day, bonds sold by subsidiaries of Shimao rose broadly in Shanghai after a report the the Chinese developer plans to repay publicly issued debts due this month.
The developer has also asked trust firms for short-term extensions of loans coming due, as it expects 10 billion yuan (about $1.6 billion) worth of cash to be released from presale escrow accounts starting Jan. 1, financial intelligence provider REDD said, citing unidentified sources.
Shimao did not respond to a request for comment.
Its flagship unit later said in a filing it has transferred funds worth 31.4 million yuan (about $4.9 million) to repay a yuan bond.
Bonds issued by Shanghai Shimao Co. Ltd. and Shanghai Shimao Construction Co. Ltd., both owned by Shimao, were among top gainers in the Shanghai Stock Exchange’s corporate bond market on Friday.
A Shanghai Shimao bond that matures in September, 2024 jumped over 7 percent.
Shimao’s biggest creditor, China Merchants Bank, plans to increase its loan exposure to Shimao—currently at 30 billion yuan (about $4.7 billion)—and plans to rally financial support for Shimao from other lenders, REDD also said, the developer plans to pay migrant worker salaries before the Chinese New Year.
Shares of Shimao listed in Hong Kong closed down 4.9 percent.
By Shanghai Newsroom and Clare Jim