Moody's said it placed Guangzhou R&F Properties Co. Ltd.'s and unit R&F Properties (HK) Co. Ltd.'s respective Ba3 and B1 corporate family ratings on review for downgrade due to concerns over the company's high debt leverage and increased liquidity risk.
The rating agency said April 3 that the outlooks on the two companies were changed to rating under review from stable.
Guangzhou R&F has a total of 62 billion yuan in debt maturing over the next 12 months, and it declared a dividend payment of 1.28 yuan per share, or a total of 4.5 billion yuan, to be paid in the second quarter. Its cash holdings of 38 billion yuan as at 2019-end and contracted sales proceeds are insufficient to cover the debt payments, and it will need to raise new debt to repay its maturing debt, Moody's said.
Moody's expects Guangzhou R&F's debt leverage, as measured by revenue/adjusted debt, to remain weak at 44% to 46% in the next 12-18 months, compared with 44% at the end of 2019.
Meanwhile, the review for downgrade on R&F Properties' rating reflects the weakened ability of Guangzhou R&F to provide financial and operating support in times of need. It also indicates the chances of deterioration in R&F Properties' standalone credit quality amid a challenging operating environment for its hotel business, Moody's added.
As of April 3, US$1 was equivalent to 7.09 Chinese yuan.