CIFI Holdings was downgraded from Ba2 to Ba3 by Moody’s. Additionally, the Chinese developer was placed on review for further downgrade. Moody’s primary rationale for the downgrade is CIFI’s slumping property sales, which continue to hurt its credit metrics. Its contracted sales have plunged 54% YTD to RMB 63.1bn ($9.3bn) compared to last year as a result of the reinstitution of pandemic restrictions and ongoing operational challenges in the Chinese real estate market. Looking forward, the rating agency anticipates CIFI’s contracted sales to fall around 35% to RMB 160bn ($23.7bn) vs. RMB 247bn ($36.6bn) in 2021. Gloomy expectations of CIFI’s operating cashflow in turn diminishes the company’s liquidity position over the next 12-18 months. Moody’s expects revenue declines to reduce CIFI’s debt leverage (revenue/adjusted debt) to 60-65% from 82%, and EBIT/interest coverage to 2.5-2.8x from 3.6x one year prior. The developer’s predicament will be exacerbated if its access to funds is restricted in the next 6-12 months. CIFI is currently rated BB by both Fitch and S&P.
CIFI’s 6.45% 2024s are trading at 37.48 cents to the dollar, down by 0.8 points.