Moody’s: Chinese property developer’s liquidity profiles have deteriorated

KUALA LUMPUR (MAY 30): Chinese property developer’s liquidity profiles have deteriorated since December last year, according to Moody’s Investors Service.

In a statement Wednesday, Moody's associate managing director Peter Choy said the deterioration stemmed specifically from higher levels of short-term debt and lower-than-expected cash balances for end-2011 against the backdrop of slowing sales and rising inventories.

In a report entitled Declining Liquidity for Chinese Property Developers Weigh on the Sector released on May 24, Moody’s said that developers may now face difficulties in refinancing for three reasons: the rise in short-term debt; the fall in the amount of cash available to cover the short-term debt; and constraints on offshore and onshore funding, including the regulatory curbs on trust financing.

Rising refinancing risk is greatest for lower-rated developers, while some of the higher rated ones, at Ba or above have backgrounds as state-owned-enterprises (SOEs), it said.

The report estimated the total amount of short-term debt due for repayment this year by Moody's 29 rated developers at 159 billion yuan (RM79.11 billion), up 23% from what a previous stress test showed in December 2011.

The total breaks down into 128 billion yuan of onshore debt and 31 billion yuan of offshore debt, it said.

Moody’s said it did not see any likelihood of improvement in the near term.

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