Hong Kong, July 10, 2020 -- Moody's Investors Service has downgraded the corporate family rating (CFR)
of Tahoe Group Co., Ltd to Caa3 from Caa1.
At the same time, Moody's has downgraded to Ca from Caa2 the backed
senior unsecured rating on the notes issued by Tahoe Group Global (Co.,)
Limited and unconditionally and irrevocably guaranteed by Tahoe.
The outlook on the ratings remains negative.
RATINGS RATIONALE
"The downgrade reflects Tahoe's tightening liquidity position and elevated
refinancing risk, given its sizeable upcoming debt maturities and
operating challenges over the next 12-18 months," says Danny
Chan, a Moody's Assistant Vice President and Analyst.
Tahoe missed payments of the principal and interest of its domestic MTN
bonds worth RMB1.6 billion ($230 million) due 6 July 2020.
The missed payments will likely result in financial losses for its noteholders,
and could also trigger payment acceleration of its USD bonds if the company
fails to rectify the missed payments within the grace period.
Moody's estimates Tahoe's debt repayment risk remains elevated as it will
need to address a large amount of upcoming maturities.
The missed payments highlight the severe challenges facing Tahoe because
of its weak access to funding and its weak liquidity stemming from the
material amount of debt maturities over the next 12-18 months.
Furthermore, weakening property sales over the past 6-12
month have strained the company's cash flow. Its contracted sales
declined to about RMB24.8 billion for the first six months of 2020,
a significant drop of 44% from the corresponding period in 2019.
Tahoe's Caa3 CFR reflects its high refinancing risk, because
of its weak liquidity and the growing uncertainty over its ability to
refinance maturing debt over the next 12-18 months.
On the other hand, Tahoe's CFR considers its land bank across major
cities in China and moderate operating scale with multiple product offerings.
The negative outlook reflects Moody's concerns over the company's tight
liquidity and ability to arrange funding on time to meet its obligations.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade is unlikely in the near term, given the negative outlook.
A positive rating action could be considered if the company makes significant
progress on servicing its debt obligations and improves its liquidity.
Moody's could downgrade the ratings if financial losses for its noteholders
are likely to increase.
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.
Tahoe Group Co., Ltd listed on the Shenzhen Stock Exchange
in 2010. The company commenced its first residential property project
in Fuzhou in Fujian Province in 1996. Its operations are mainly
focused on residential property development, and it is also engaged
in commercial property development.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
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The first name below is the lead rating analyst for this Credit Rating
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Danny Chan
Asst Vice President - 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
Client Service: 852 3551 3077
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
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
