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Fitch downgrades Xinyuan Real Estate ratings

Fitch Ratings lowered its ratings on Xinyuan Real Estate Co. Ltd. to B- from B, with a stable outlook.

The downgrade pertains to the Chinese homebuilder's long-term issuer default rating, senior unsecured rating and the rating on all its outstanding senior unsecured bonds.

The rating agency said the downgrade takes into account its expectations that Xinyuan's leverage will stay above 50% in the next two to three years after a 61% rise in the first half of 2019. The company's high leverage and small contracted-sales scale limit the company's rating.

Fitch believes that Xinyuan's land acquisitions will help it in deleveraging and estimates the homebuilder's land reserve life at more than four years in the first half of 2019.

The rating agency also expects that Xinyuan's attributable contracted sales will not be more than 20 billion Chinese yuan in the medium term following an 8% drop to 14 billion yuan in 2018.

As of Oct. 3, US$1 was equivalent to 7.15 Chinese yuan.