Moody’s has downgraded CIFI Holdings’ issuer rating and senior unsecured rating by two notches, from B1 to B3 and B2 to Caa1 respectively, assigning them a negative outlook. The rationale for the downgrade stems mainly from the Chinese developer’s heightened refinancing risk due to its weakening liquidity profile. CIFI’s contracted sales since the start of the year have declined 47% YoY to RMB 94.3bn ($13.25bn). Amid poor market conditions and low consumer confidence in CIFI, the rating agency has cut forecasts for contracted sales to RMB 135bn ($19bn) and RMB 120bn ($17bn) in 2023, compared to RMB 247bn ($34.7bn) in 2021. Additionally, the developer will likely struggle to raise capital at affordable rates to refinance its debt maturing by 2023 which amounts to RMB 8bn ($1.12bn) in puttable onshore and offshore bonds. This will force CIFI to tap its cash holdings of RMB 31.1bn ($4.37bn) as of June 2022, further depleting its liquidity buffer. Moody’s also expects CIFI’s credit metrics to worsen, forecasting its EBIT/interest coverage to fall 2.3-2.6x from 3.6x for the 12 months ended June 2022 and its debt leverage (revenue/adjusted debt) to decrease to 55-60% from 78% for the 12 months ended June. Moody’s continues to remain uncertain on the company’s ability to generate new funds and restore liquidity.
CIFI’s bonds are currently trading at distressed levels of ~15-20 cents on the dollar.
