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Chinese developers Sino-Ocean, Road King and Seazen were downgraded by Moody’s yesterday:
Road King was downgraded to B1 from Ba3 due to its “weak credit metrics and decline in operating scale”. Road King’s contracted sales are expected to fall by 10% in 2023 after an 18% drop in 2022. This will weaken its operating cash flow and credit metrics over the next 1 year. Interest coverage is expected to weaken to 2.1x from 2.4x. Besides, Moody’s expects revenues to drop “significantly” and profit margins “marginally”. Also, its liquidity buffer is expected to drop as the company repays debt.
Seazen Group was downgraded to B1 from Ba3 upon weak contracted sales and market position coupled with expectations for worse credit metrics. Contracted sales are expected to fall by 15% in 2023 after a 50% drop last year, weakening its cash flows and credit metrics over the next 1 year. Interest coverage is expected to weaken to 2.2-2.4x from 3.2x. Liquidity however will remain adequate, Moody’s noted.