Country Garden (COGARD) was downgraded to BB- from BB+ upon the property sector’s poor capital-market conditions, limiting COGARD’s ability to access to funding and negatively impacting its financial flexibility. Fitch notes that despite COGARD being the beneficiary of Beijing’s state-backed bond issuance program, it has done little to stabilize capital market access. COGARD is still preparing for a further issuance of bonds guaranteed by China Bond Insurance, expected to be completed by end-2022. Fitch however notes that the developer’s contracted sales may have stabilized of late after improving 11% MoM to RMB 32bn ($4.4bn), and that its cash balances and cash generation should be ample to cover its medium-term debt maturities. Sales sustainability however, remains to be an important factor to be watched out for given the broad challenging market environment.

COGARD’s dollar bonds were trading weaker by over 1.5 points at ~10 cents on the dollar.

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