Fitch has downgraded Central China Real Estate to B from B+ citing tight liquidity following weak contracted sales in H1 2022. Consequently, there is uncertainty whether it can repay an outstanding amount of $500mn on its dollar bonds due in August 2022. In light of the troubled Chinese property market, Fitch expects Central China’s full-year contracted sales to continue its decline and fall by 30%, to around RMB 42bn ($6.2bn) in 2022. While this is the case, Fitch is mildly optimistic that the Chinese developer’s unrestricted cash of RMB 5.9bn ($877mn) at end-2021 appears sufficient to cover the quantum of the offshore bonds and RMB1.2bn ($178mn) local trust loans maturing later this year. In addition, its leading market position in Henan might allow the company to obtain some support from the local government. Lucror Analytics said that Fitch not seeing immediate liquidity constraints for the credit, should be a positive for Central China’s outstanding dollar bonds

The abovementioned 6.875% dollar bonds due August 2022 are trading lower at 54.5 cents to the dollar, lower by 1.78 pts.

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