Chinese Developer Sinic Downgraded By S&P For ‘Unclear Repayment Plan’

S&P Global Ratings downgraded Sinic Holdings (Group) Co Ltd to ‘CCC+’ on Tuesday, saying it sees “substantial risk” over the Chinese developer’s ability to repay $246 million in senior notes due next month.

S&P lowered Sinic’s long-term issuer credit rating from B and blamed the company’s “lack of concrete repayment plans amid the short remaining time to maturity, despite its sufficient unrestricted cash as of June 30.”

“Sinic had previously prepared to remit funds offshore to repay its $246 million senior notes due on October 18, 2021, with its unrestricted cash balance of over 14 billion Chinese renminbi ($2.17 billion) as of June 30, 2021. However, there hasn’t been any progress thus far and the timing of any remittance is uncertain,” the credit-rating firm said in its note.

China’s property sector is facing a major crisis and Sinic is just one of many developers being dragged down by the government’s move to restrict access to credit to deleverage huge debts within the sector, which are seen as a risk to the country’s financial stability.

Beijing also wants to cut home prices and remedy Hong Kong’s chronic housing shortage.

HORROR DAY

Fitch downgraded Sinic last Wednesday, but news that officials from Beijing met with property tycoons in Hong Kong on Friday led to a horror day at the Hong Kong Stock Exchange on Monday, when the group’s stock plummeted 87%.

The share plunge reduced Sinic’s market capitalisation to less than a quarter of a billion dollars and cost company chairman Zhang Yuanlin over $1 billion – see link below – before the firm suspended trading.

Sinic stock, which has traded at more than $4 for much of the past year, was down to just 50 Hong Kong cents on Tuesday.

S&P said it had placed the company on CreditWatch Negative “to reflect the company’s lack of consistent communication, its unclear plans for debt repayment and inadequate risk management.”

• By Jim Pollard