Chinese property developer China Aoyuan has been downgraded to RD from C by Fitch following the company’s announcement on January 19 that it will not be making payments on four of its dollar bonds. Fitch has affirmed its senior unsecured ratings at C with a Recovery Rating of RR6, the lowest on the Recovery Rating scale with historical recovery values of just 0-10%. Fitch’s liquidation estimate reflects the value of balance sheet assets that could be realized in a sale or liquidation process, and assumes an Advance rate (Term of the Day, explained below) of:

  • 80% to accounts receivable (up from 70%)
  • 30% to the book value of investment properties, essentially malls in tier 1 and 2 cities
  • 50% to property, plant and equipment, mainly hotels and buildings of insignificant value (down from 60%)
  • 57% to net property inventory (down from 60%)
  • 50% to JV net assets (down from 60%)
  • 0% to excess cash after netting trade payables (down from 60%)

Aoyuan’s dollar bonds continue to trade at distressed levels of 14-15 cents on the dollar.

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