Corporate Debt Restructuring Masterclass

18 July 2022 (Mon), 5pm Singapore/HK time

Rating agency Moody’s downgraded China Fortune Land Development (CFLD) to Caa3 from Caa1 on Tuesday and will withdraw all of the ratings following the downgrade due to lack of adequate information while keeping the outlook negative. Reasons for the downgrade include weak liquidity following the missed payments on its bonds that is likely to trigger cross-defaults and accelerate the repayment of CFLD’s onshore and offshore bonds. This would weaken the company’s operations and hurt asset values, thereby making the recovery value for its bondholders low. Moody’s also downgraded CFLD’s senior bonds to Ca from Caa2 citing structural subordination risks as majority of claims are at operating subsidiaries and have priority over that of the holding company in an event of bankruptcy.

Concurrently, Fitch also downgraded CFLD to RD (Restricted Default) from CC and its dollar bond ratings to C from CC citing similar reasons, adding “CFLD has chosen to stop participating in the rating process.” Moody’s and Fitch had also downgraded CFLD to Caa1 and CC around the same time last month.

CFLD’s dollar bonds were slightly higher – its 6.92% 2022s were up 1.2 points to 38.9 and its 8.05% 2025s were up 1.1 to 38.9.

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