Second property developer gets bad rating

• Source: Global Times
• [13:11 June 17 2010]
• Comments

By Zhou Mi

Cars and buses in a parking lot on a land plot located just south of the Bund, with the skyline of Lujiazui Financial District in Pudong New Area visible across the water. Shanghai Zendai bought the plot for 9.2 billion yuan in February. Photo: IC

Global financial analysis agency Moody's Investors Service has for the second time in a week downgraded its rating outlook of a major property developer in the Shanghai market.

Moody's changed its rating outlook for Hong Kong-based Glorious Property Holdings from "stable" to "negative" on Tuesday, following its downgrading of Shanghai Zendai Property last Friday.

"The negative outlook reflects Glorious Property's weakened liquidity position as a result of taking on onshore borrowings with shorter maturity than the proposed bonds," Kaven Tsang, an analyst from Moody's, said in a press release.

"The onshore loans, which normally have maturities of between one to two-and-a-half years, will increase the company's liquidity risk as it needs to refinance more debts over the next 12 to 24 months in the backdrop of more regulations over lending to the property developers," Tsang continued.

Glorious Property suspended plans to issue bonds overseas at the end of April, instead opting for onshore borrowing, 21st Century Business Herald reported on April 29.

"Developers can easily face financing problems when they expand too fast, especially under the current restrictive government policies," Xue Jianxiong, an analyst from consulting firm China Real Estate Information, told the Global Times Wednesday. "However, I don't think there is too much risk for them if they are prepared to sell their properties for a lower price."