Fitch Ratings has affirmed the Long-Term Foreign-Currency Issuer Default Ratings (IDR) on
It has also affirmed RFHK's senior unsecured rating and the rating on the RFHK-guaranteed notes issued by
The affirmation reflects that Guangzhou R&F and RFHK remain in default on certain bank and other borrowings.
Fitch is withdrawing the senior unsecured rating of Guangzhou R&F as it is no longer considered by Fitch to be relevant to the agency's coverage because the entity is no longer issuing debt.
Key Rating Drivers
Loans Deemed to be in Default: Based on the auditor's report in the company's 2022 financial statements,
Unsustainable Capital Structure: The group faces around
The currently weak sales imply that the company may continue to struggle to generate sufficient cash flow for debt reduction and that capital market funding access will remain limited.
Weak Contracted Sales: Contracted sales declined by 45% yoy to
The group had land bank of 47.1 million square metres as of end-2022, or approximately
Further Asset Disposals: We expect further asset disposals to provide additional liquidity. The company completed
Derivation Summary
The 'RD' rating reflects that the company remains in default on certain bank and other borrowings.
Key Assumptions
Contracted sales of
Construction cost paid at 65% of sales proceeds, no land acquisitions
Investment property and hotel capex of
RATING SENSITIVITIES
Guangzhou R&F
Factors that could, individually or collectively, lead to positive rating action/upgrade:
a resolution of the default that results in a sustainable debt structure and maturity profile.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Evidence that Guangzhou R&F has entered into bankruptcy filing, administration, receivership, liquidation or other formal winding-up procedure, or otherwise ceased business.
RFHK
Factors that could, individually or collectively, lead to positive rating action/upgrade:
a resolution of default that results in a sustainable debt structure and maturity profile.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Evidence that RFHK has entered into bankruptcy filing, administration, receivership, liquidation or other formal winding-up procedure, or otherwise ceased business.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Tight Liquidity: The company had
Issuer Profile
Founded in 1994, Guangzhou R&F is a property developer focusing on medium- and high-end property development. The company also engages in hotel development, commercial operations, property management and architectural and engineering design. RFHK is Guangzhou R&F's wholly owned offshore investment and financing platform.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Guangzhou R&F has an ESG Relevance Score of '4' for Management Strategy, reflecting persistently weak contracted sales and an unsustainable capital structure, despite a debt extension. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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