S&P downgrades Sunac China

Standard & Poor’s said it lowered the long-term corporate credit rating on Sunac China Holdings Ltd. to B+ from BB-.

The outlook is stable.

S&P also said it lowered the long-term issue rating on the company’s senior unsecured notes to B from B+, along with the long-term Greater China regional scale ratings to cnBB from cnBB+ and on the notes to cnBB- from cnBB.

The ratings were removed from CreditWatch, where they were placed with negative implications in February, the agency said.

The downgrade reflects an expectation that Sunac’s cash flows and leverage are likely to remain weak over the next six to 12 months following a sharp deterioration in 2014, S&P said.

Sunac’s consolidated contract sales, revenue and EBITDA margin in 2014 were significantly lower than expectations, the agency said.

Sunac’s profitability is likely to improve slightly in 2015 as the company clears less profitable projects in its portfolio. However, the improvement is not likely to materially change the leverage, S&P said.

Management’s aggressive appetite for acquisition will likely continue to put pressure on the company’s financial risk profile, the agency added.

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