Chinese homebuilder Golden Wheel Tiandi (GWT) was downgraded by Fitch to CCC+ from B- on weak liquidity, refinancing risks and a deterioration of their business profile. Fitch said that the downgrade also reflects the likelihood of the company having difficulties meeting its outstanding $255mn 14.25% 2023s that are puttable in January 2022, and their $200mn 12.95% 2022s. Fitch says GWT has significant exposure to commercial real estate, which increases the risk of sales underperforming due to slow cash collection and high reliance on two projects. Fitch noted GWT is under ‘urgent pressure to replenish the residential land bank’ in 2021 with the land bank sufficient to support residential sales for only one year. Gross profit margins for the company eroded to a mere 3.7% in 2020 due to high construction costs and a zero-margin project in Zhuzhou. Margins were down from ~24% in 2019 and 30-50% from 2016-18. Fitch adds that liquidity is weak with cash to short-term debt at 0.5x end-2020. GWT had CNY 849mn ($131mn) in unrestricted cash as at end-2020 and CNY 186mn ($29mn) in undrawn bank facilities, insufficient to cover CNY 3bn ($462mn) in short-term debt implying that the company has to depend on refinancing.
GWT’s 14.25% 2023s and 12.95% 2022s were slightly lower at 98.16 and 96.13, yielding 15.47% and 17.81% respectively.
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