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Road King Infrastructure was downgraded by to B3 from B2 by Moody’s. The downgrade comes on the back of Moody’s expectation that Road King’s liquidity buffer will deplete over the next year, while access to offshore funding will remain constrained. Moody’s projects that Road King’s annual contracted sales will fall to around RMB 28-30bn ($4-4.2bn) in 2023 from RMB 40.6bn ($5.7bn) in 2022 straining its operating cash flows leading to weakening of credit metrics. Moody’s also downgraded the rating of Road King’s senior unsecured bonds to Caa1 from B2, due to increased risk of subordination.
Road King’s dollar bonds continue to trade at distressed levels, with its 5.125% 2026s at 28 cents on the dollar.
Over the past year, several Chinese developers have faced a similar liquidity depletion and have defaulted on their debt obligations. In one such news, Powerlong Real Estate reported that it failed to pay $15.9mn in coupons on its 5.95% 2025s due to insufficient liquidity.