Times China was downgraded to B2 from B1 by Moody’s on the back of weakening liquidity and declining operating cash flow. This is due to declining contracted sales which Moody’s expects to fall by 35-40% in 2022 and again in 2023. Besides, constrained access to debt capital markets will also weigh on the developer as it relies heavily on these modes of funding (onshore and offshore bonds equal ~58% of total debt). On April 20, it has $342mn of its 5.3% dollar bonds maturing, which currently trade at 96.8. Whilst Moody’s expects Times China to use internal cash sources if the refinancing channels are shut, to pay its maturing debt. This will in turn reduce its funding headroom to support its business operations. At end-2021, its unrestricted cash declined by 34% to RMB 14.7bn ($2.3bn). Times China’s EBIT/interest coverage is also set to worsen to 2.5-3x over the next 12-18 months from 3.2x for 2021.

Times China dollar bonds were up 3-4 points with its bonds due 2023 and 2024s at just over 65 cents on the dollar and the bonds maturing beyond at over 50 cents on the dollar.

Redsun Properties was downgraded to B3 from B2 reflecting refinancing risks and weakened liquidity. Similar to Times China, this is due to declining contracted sales as seen by a 36% and 41% YoY drop in the first two months of 2022. Redsun is expected to use internal cash sources which would further pressurize liquidity. EBIT/interest coverage is expected to weaken to 1.5-1.6x from 1.9x over the next 12-18 months. Furthermore, Redsun’s auditor notes the “existence of material uncertainty in the company’s ability to continue as a going concern” in its 2021 results. Market confidence is set to only diminish and further constrain Redsun’s funding.

Redsun’s $401.8mn 9.95% dollar bonds maturing April 11 were up 1.1 points to 99.88. Its other dollar bonds were up over points to trade at 25-29 cents on the dollar.

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