KWG Group was downgraded to B from B+ by Fitch due to declining liquidity and financial flexibility. KWG’s total cash and bank balances declined 33.9% to RMB 29.4bn ($4.5bn) in 2021, while available cash dropped 81% to RMB 7.7bn ($1.2bn). This shows its deteriorating liquidity. The developer said that holding-level cash of RMB 12bn ($1.8bn) was available for debt repayment at end-March 2022. Fitch adds that net leverage, measured by net debt/net development property assets, rose to above 50% end-2021 from 40% in 2020. While the developer is trying to address its debt maturities, large dues still remain with ~RMB 10.5bn ($1.6bn) in capital-market debt maturities in the rest of 2022. Its contracted sales slowed 40% YoY in Q1 2022 and projects are focused on China’s Greater Bay Area and Yangtze River Delta where strict social restrictions have been imposed. Fitch also notes that going concern doubts exist after the release of its audited statements post a delay given that available cash to short-term debt stood at 0.38x.

KWG’s dollar bonds were stable – its 2022s were at 55-56 cents on the dollar while its other bonds were trading at 30 cents.

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