Xinyuan Real Estate and its senior unsecured notes have been downgraded by Fitch to CCC from B- on account of heightened refinancing risk on its outstanding $229mn 14.2% bonds due October 2021 and internal control weaknesses, as highlighted by the continued delay in publishing its audited financial results. The ratings have been removed from negative rating watch. Fitch estimates Xinyuan’s total cash balance of around CNY 8bn ($1.24bn) as at end-2020; and excluding restricted cash and cash held by subsidiary Xinyuan Property Management Service (Cayman), available cash of around CNY 5bn ($770mn). However, it is not clear how much of this is readily available to redeem the bonds. Besides, relying on cash to repay the bonds may curtail its ability to maintain sufficient working capital and replenish its landbank. Also, its delayed audited earnings weigh on investor confidence and its credit profile. Fitch however notes that Xinyuan’s steady contracted sales and leverage (net debt/adjusted inventory) dropping to 50% in 2020 are positives.
In late July, S&P revised the outlook on Xinyuan’s B- issuer rating and CCC+ bond rating to negative from stable on liquidity concerns over its offshore maturities. Xinyuan’s dollar bonds were flat with its 14.5% 2023s at 83.1 and its 14.2% 2021s at 90.3.
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