S&P Global Ratings revised its outlook on Guorui Properties Ltd. to negative from stable to reflect the company's weakening liquidity following larger-than-expected land acquisitions in 2017.
The rating agency also affirmed its B long-term corporate credit rating on the company, as well as the B- long-term issue rating on its outstanding senior unsecured notes. S&P said in a release that the company's leverage could further worsen if it continues its debt-funded expansion. It noted that refinancing future debt obligations could prove tricky in light of the developer's accelerated rate of growth and China's tightened credit environment.
Guorui Properties' ratio of unrestricted cash to short-term debt stood at 20% as of June 30, down from 43% in 2016.
The affirmation was attributed to S&P's expectation that an improvement in the company's contracted sales could help strengthen liquidity over the next 12 to 24 months, boosting its sellable resources to 30 billion Chinese yuan in 2018, from 23 billion yuan in 2017.
As of Dec. 1, US$1 was equivalent to 6.62 Chinese yuan.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.