Fitch lowers Sunac

Fitch Ratings said it lowered Sunac China Holdings Ltd.'s issuer default rating to B- from BB- and the senior unsecured rating and outstanding senior unsecured notes to B- from BB- and assigned an RR4 recovery rating. The agency placed all the ratings on rating watch negative.

“The downgrade reflects increasing uncertainty over the refinancing of Sunac's onshore and offshore capital-market debt maturing over the next few months amid decreasing market confidence, as well as falling contracted sales. Sunac raised long-term funding via share placements in January 2022, but capital markets have since become largely inaccessible for the company. Sunac has disposed of its stakes in some projects and is currently in discussions on additional project sales. Nevertheless, Sunac's margin of safety is narrowing,” Fitch said in a press release.

Sunac has CNY 17 billion in onshore and offshore bonds due in 2022, including CNY 4 billion in onshore puttable bonds and CNY 1.7 billion in onshore asset-backed securities due in April, $600 million in offshore and CNY 1.44 billion in onshore bonds due in June, $600 million in offshore and CNY 2.09 billion in onshore bonds due in August, and CNY 1.3 billion in onshore bonds puttable in September.

The RWN indicates the potential for further negative rating action if Sunac does not address the upcoming debt maturities and make significant progress in asset disposals, and if there is further weakening in liquidity and funding access.

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