Moody's downgraded senior unsecured ratings of Central China Real Estate Ltd. to B1 from Ba3, with a stable outlook.
The downgrade came on the back of the company's senior unsecured bond rating, which is lower than its corporate family rating due to structural and legal subordination risks.
The subordination risk mirrors that the majority of the property developer's claims are at the operating subsidiaries, taking precedence over claims at the holding company in a bankruptcy scenario. Moody's additionally noted that the holding company lacks significant mitigating factors for structural subordination, resulting in a lower expected recovery rate for claims at the holding company.
