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Fitch upgrades China's Tahoe Group on reduction in secured debt

Fitch Ratings upgraded Tahoe Group Co. Ltd.'s senior unsecured rating to B- from CCC+ following a reduction in the Chinese homebuilder's secured debt amid a continuous deleveraging trend.

The company's recovery rating was also revised to RR4 from RR5.

Tahoe Group's secured debt dropped to 71 billion yuan in the third quarter from 90 billion yuan in the first quarter. The rating agency noted that the company's deleveraging strategy also helped lower its total debt during the same period by 23 billion yuan to 104 billion yuan from 127 billion yuan.

Fitch said Tahoe Group's ratings are constrained by its high leverage, which resulted from aggressive land purchases before 2018. Most of the said acquisitions are financed with debt, which weakens the homebuilder's ability to generate cash flow, the agency added.

As of Dec. 23, US$1 was equivalent to 7.01 yuan.