Yuzhou Group was downgraded to Caa2 and CCC- by Moody’s and Fitch from B2 and B. The downgrades were on account of increased refinancing risks due to weakened funding access and sizable maturing debt. Yuzhou has to refinance $350mn of its 6% bonds due January 25, 2022 and $242mn of its 8.625% bonds due January 23, 2022. As of end-June 2021, Yuzhou had unrestricted cash of RMB 25bn ($3.9bn) vs. short-term debt of RMB 15.2bn ($2.4bn), but uncertainty exists on its ability to mobilize all the cash, particularly for the cash holdings at the project and operating companies’ levels, for debt repayment. Similar to Shimao, contracted sales are expected to decline significantly over the next 6-12 months due to weak homebuyer confidence, slowdown in land acquisitions and tight funding conditions.
Yuzhou’s dollar bonds were stable, trading at distressed levels of over 19 cents on the dollar.