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S&P revises Wuhan Real Estate outlook to negative

S&P Global Ratings revised Wuhan Real Estate Development & Investment Group Co. Ltd.'s outlook to negative from stable due to the potential knock-on impact of the Wuhan municipal government's weakening credit quality on the company.

The Wuhan municipal government in China directly owns 100% of the company.

The company's negative outlook indicates that the Wuhan municipal government's debt will remain very high over the next two years, and its budgetary performance will weaken during the period due to uncertainty in revenue growth and rising capital spending. The local government's high debt burden is driven by large off-budget borrowing via state-owned enterprises and a surge in on-lent bond issuances to fund infrastructure and industrial investments, according to the rating agency.

Ratings said Sept. 23 that it affirmed the property developer's long-term issuer credit rating and long-term issue rating on senior unsecured notes at BBB-.

The rating on Wuhan Real Estate is primarily linked with the credit profile of the Wuhan government. The rating agency believes the company is highly likely to receive extraordinary government support in times of financial stress due to its integral link with the local government.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found in the sources section.