Moody's downgrades LVGEM

Moody's Investors Service said it downgraded the corporate family rating of LVGEM (China) Real Estate Investment Co. Ltd. to B3 from B2, along with basked senior unsecured rating on the notes issued by Gemstones International Ltd. to Caa1 from B3.

Gemstones is a wholly owned subsidiary of LVGEM.

The outlooks on all of the ratings also were changed to stable from negative.

The downgrades reflect an assessment that LVGEM is unlikely to reverse its weakening liquidity position over the next 12- to 18-months, which raises financial risk amid tight credit conditions in China, Moody's said.

LVGEM's cash flow is reliant on the success of its contracted sales from the Mangrove Bay No. 1 project, leaving it vulnerable to the risk of regulatory changes in Shenzhen, the agency said.

Tight conditions in China's credit markets and risk-averse sentiment in the offshore bond markets could make it difficult for the company to raise new borrowings in the near term, Moody's said.

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