Moody’s Investors Service has downgraded Country Garden Holdings Co. Ltd.’s rating to Caa1 from B1 due to its failure to make interest payments on dollar bonds earlier this week. The downgrade is a result of Country Garden’s heightened liquidity and refinancing risks, along with its deteriorated liquidity and financial flexibility, sizable refinancing needs, and constrained access to funding.
The developer missed $22.5 million of interest payments that were due on Monday for its debt with a face value of $1 billion. Consequently, the prices of the two bonds, maturing in 2026 and 2030 respectively, fell below 8 cents on the dollar and remained at distressed levels on Wednesday. This news has sparked concerns about China’s struggling property sector, particularly after other defaults in the industry, such as those from China Evergrande Group in the past two years.
Nevertheless, Country Garden has a 30-day grace period to make the payments. However, if it fails to do so, it would not only dampen market confidence but also impair the company’s access to funding, according to Moody’s.