Hong Kong, February 23, 2022 -- Moody's Investors Service has downgraded Jingrui Holdings Limited's
corporate family rating (CFR) to Caa2 from B3, and the company's
senior unsecured ratings to Caa3 from Caa1.
The outlook on the ratings remains negative.
"The rating downgrades reflect Jingrui's heightened liquidity risk,
following its proposed exchange offer and consent solicitation to its
noteholders," says Cedric Lai, a Moody's Vice President and
Senior Analyst.
"The negative outlook reflects the uncertainty over the company's ability
to address all its near-term debt maturities amid challenging funding
conditions," adds Lai.
RATINGS RATIONALE
On 22 February 2022, Jingrui announced an exchange offer and consent
solicitation to its bondholders for the company's USD senior notes
due in March 2022 with a total principal amount of USD190 million.
The company said that it may not be able to fully redeem the notes if
the consent solicitation is not successful.
The proposal indicates Jingrui's liquidity stress. In particular,
the company had offshore bonds of USD600 million maturing before the end
of December 2022. Jingrui had unrestricted cash of RMB11.1
billion as of the end of June 2021, but Moody's estimates
that a significant portion of such cash resides at the operating project
levels, which could not be used to repay its debt at the holding
company level, particularly the offshore bonds. In addition,
the company has a high exposure to joint ventures, which could limit
its ability to control its cash flow.
Moody's expects Jingrui's contracted sales to decline notably over the
next 6-12 months, driven by weak homebuyers' confidence and
tight funding conditions. This will, in turn, reduce
the company's operating cash flow for debt repayment.
Jingrui's Caa2 CFR reflects the company's weak liquidity over the next
12-18 months, and Moody's expectation that the company will
face difficulties in raising new funds from onshore and offshore channels
to address its refinancing needs amid tight funding conditions.
The Caa3 senior unsecured debt rating is one notch lower than its CFR
due to structural subordination risk. This risk reflects the fact
that the majority of claims are at the operating subsidiaries and have
priority over Jingrui's senior unsecured claims in a bankruptcy scenario.
In addition, the holding company lacks significant mitigating factors
for structural subordination. As a result, the expected recovery
rate for claims at the holding company will be lower.
In terms of environmental, social and governance (ESG) factors,
Moody's has considered Jingrui's concentrated ownership by its key shareholders,
Mr. Chen Xin Ge and Mr. Yan Hao, who held an approximate
67.9% stake in the company as of the end of June 2021.
Moody's has also considered the presence of other internal governance
structures and standards as required by the Hong Kong Stock Exchange,
where the company is listed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade is unlikely given the negative outlook.
However, the outlook could return to stable if Jingrui improves
its funding access and materially reduces its refinancing risks.
On the other hand, Moody's could downgrade the ratings if the company's
liquidity and refinancing risks heighten, or if the recovery prospects
for its creditors deteriorate.
The principal methodology used in these ratings was Homebuilding And Property
Development Industry published in January 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1108031.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Jingrui Holdings Limited is a Shanghai-based property developer.
The company was listed on the Hong Kong Stock Exchange in October 2013.
It was originally established in 1993 as Shanghai Jingrui Property Development
Company by a group of businessmen, including its current key shareholders
and executive directors, Mr. Chen Xin Ge and Mr. Yan
Hao.
The company engages in property development, with a focus on residential
projects in the Yangtze River Delta and other second-tier cities
in China. As of June 2021, Jingrui had a total land bank
of about 5.3 million square meters across 18 cities in China,
including Beijing, Shanghai, Tianjin, Hangzhou,
Suzhou, Nanjing and Ningbo.
REGULATORY DISCLOSURES
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analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions in the disclosure form. Moody's Rating Symbols and
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Cedric Lai
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
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Franco Leung
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
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