Chinese real estate developers are having a difficult year in 2022, as some of the country's most well-known developers continue to struggle with a crisis that has been building for months.
Shimao Group, a Shanghai-based developer, was downgraded yet again this week by two major credit rating agencies, pushing it even further into junk territory.
Some of the company's properties may be sold off in order to reduce the company's debt load.
According to S&P Global Ratings, Shimao's liquidity has declined significantly — the decline is worse than we previously anticipated.
Two months ago, S&P had Shimao rated investment-grade. Now the analysts feel that the company may not have sufficient liquidity
In its Monday downgrade, Moody's cited "elevated" liquidity risks, significant near-term debt maturities, and decreasing access to funding as reasons for the B2 rating reduction for Shimao.
Caixin, a Chinese news outlet, reported over the weekend that Shimao, a cash-strapped company, has put up for sale all of its domestic real estate projects.
A Hong Kong stock exchange filing on Tuesday stated that Shimao had not entered into any preliminary agreement regarding the sale of Shanghai Shimao International Plaza, which is located in Shanghai.
A few assets will be sold if the company gets the right valuations, as said by the company
Shimao's plight is yet another setback for the country's real estate market, which has been in decline for some time now.
Beijing began cracking down in 2020 on developers' excessive borrowing in an effort to rein in their high leverage and curb soaring housing prices.
It was only last fall, however, that China's most heavily indebted developer Evergrande began warning more urgently of liquidity problems.
Fitch Ratings has since designated Evergrande as a defaulter for allegedly failing to meet some financial obligations last month.
The newly formed risk management committee of the company now includes government officials as well, and this is widely seen as a move to guide the company through a reorganisation of its debt and extensive business operations.
Shimao was once regarded as a more financially secure company than its more heavily indebted competitors. However, the property sector's debt woes have spread and caused a bond and stock rout in the last month.
Shimao Group's stock price has dropped by over 20% in the last month.
Onshore bonds totaling 8.9 billion yuan ($1.4 billion) and "sizable" off-shore bank loans totaling $1.7 billion are among the Shimao Group's debt maturities due in 2022.
Many other developers, such as Kaisa and Fantasia, are having difficulty refinancing their projects due to a combination of a weakening property market and aversion to risk among banks and investors.
Analysts are of the view that this could have a spill off effect on the US market as inflation woes & FED losing focus of the economy can have a downward spiral this year
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