Chinese property developer Yuzhou Group Holdings was downgraded to Ca from Caa2 by Moody’s with a negative outlook. Yuzhou missed the coupon payments on several bonds after the expiration of the grace period in March 2022. The company has weak liquidity and limited financial flexibility. Moody’s expects recovery prospects for Yuzhou’s creditors could weaken further if the coupon defaults trigger a wider cross-default of it’s other debts. Yuzhou may go through a debt restructuring process and have to depend on asset sales or investments for raising funds. Moody’s notes that these fundraising activities involve high execution risk and uncertain recovery prospects for creditors. The company’s senior unsecured bond rating was also lowered to C which is one notch below its CFR (Corporate Family Rating) due to structural subordination.

Yuzhou’s dollar bonds are trading at distressed levels of 9-15 cents to a dollar.

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