Moody's downgraded its corporate family rating on Hydoo International Holding Ltd to B3 from B2, with a negative outlook.
The rating agency also cut its senior unsecured rating on the company's U.S. dollar-denominated bonds to Caa1 from B3.
Moody's attributed the downgrade to its concern that the company's ability to refinance debt will be weak over the next 12 to 18 months, as its contracted sales are unlikely to improve, based on the rating agency's expectation of weak demand for trade centers in China's low-tier cities, the locations at which Hydoo operates.
The rating agency's outlook on the company reflects Hydoo's decreased liquidity position and weak credit metrics.
Lack of strong growth in contracted sales will make it harder for the company to refinance its US$160.0 million of bonds due in December 2018, and will cause the company's revenue to adjusted debt ratio to fall to 45% to 50%, from 52% for the 12 months to June 30. The company's EBIT to interest ratio will also likely fall to 1.5x to 1.7x from 1.8x in the same 12 months.