Fitch cuts Nan Fung

Fitch Ratings said it downgraded Nan Fung International Holdings Ltd.'s long-term issuer default rating to BBB- from BBB. The outlook is stable. Fitch also downgraded the perpetual securities issued by Nan Fung Treasury (II) Ltd. to BB+ from BBB-. The downgrade reflects the weakening of Nan Fung's financial profile during the construction buildout stage of its key investment property project, Kai Tak commercial complex.

“We expect recurring income EBITDA/gross interest coverage to remain below 2x in the next few years and for the Kai Tak project to ramp-up from the financial year ending March 2022 (FY22),” said Fitch in a press release.

Economic sentiment has dampened given the coronavirus outbreak, political and social unrest in Hong Kong and ongoing uncertainties surrounding the U.S.-China trade war with retail sales falling accordingly. “We expect mildly negative rental reversion, lower occupancy for Nan Fung's malls and offices and a drop in hotel revenue. We also forecast slower development property sales and delays in new project launches,” Fitch said.

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