Central China Real Estate (CCRE) was downgraded by Moody’s to B1 from Ba3. The downgrade was on the back of weakened funding access, reduced operational flexibility due to geographic concentration in Henan and reduced financial flexibility. Moody’s expects CCRE’s contracted sales to decline over the next 6-12 months due to weaker homebuyer confidence amid tight funding conditions, though it has sizable saleable resources. This would hurt operating cash flow and add pressure to the company’s profit margin. Also, given weak access to offshore markets, using internal cash can reduce the funding available for its operations over the next 12-18 months. The rating action by Moody’s follows their downgrade of Yuzhou yesterday and that of three other peers Kaisa, R&F, Greenland.

CCRE’s dollar bonds were mixed with its 7.25% 2024s down 1.1 to 45.2 and its 6.75% 2021s up 1.4 to 94.98.

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