China Aoyuan was downgraded to B- from B+ by Fitch citing “decreasing access to funding amid refinancing needs in the coming 12 months”. This includes its $500mn 8.5% bonds due January 2022 and $188mn 4.2% bonds due January 2022. While Fitch believes Aoyuan has some options to address the upcoming maturities via asset disposals, it is subject to execution risk. As of end 1H2021, Aoyuan had available cash of RMB 51.8bn ($8.1bn) with a majority likely to be at project level. It has CNY 8.8bn ($1.4bn) of debt maturing or becoming puttable by end-2022. Aoyuan’s contracted sales dropped by 33% YoY in October after a 9% fall in September, which can weaken its financial flexibility. Aoyuan has announced disposal of certain projects in Hong Kong for cash of HKD 900mn ($115.5mn) and is seeking to sell other assets though it will take time.

Aoyuan’s dollar bonds have inched higher with its 7.95% 2024s up 2.26 points to 31.87 cents on the dollar amid an uptick across property sector bonds.

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