Moody's downgraded Country Garden Holdings Co. Ltd.'s senior unsecured rating to Ba2 from Ba1, keeping the outlook stable.
The rating agency expects the Chinese company's senior unsecured bond rating to be lower than its corporate family rating by one level, owing to structural and legal subordination risks stemming from most of its claims being spread among its operating units. The claim set-up would subsequently give the units' claims priority over the Country Garden's holding entity's claims in the case of bankruptcy.
Moody's also said the downgrade reflects Country Garden not holding enough significant mitigating factors for structural subordination, which would lead to anticipated recovery levels for the holding company's claims being reduced.
Earlier in September, Fitch upgraded Country Garden's senior unsecured rating to BBB- from BB+, citing its strengthened business and financial profiles as reasons for the upgrade.
