Moody's Declares China’s Second-Largest Real Estate Firm Vanke 'Non-Investment Grade'

Lowest Among Investment Grade
Possibility of Further Downgrade

International credit rating agency Moody's has downgraded the credit rating of China's second-largest real estate company Vanke (萬果·Vanke) to a 'non-investment grade' rating.

[Image source=Reuters Yonhap News]

According to Bloomberg and other sources on the 11th (local time), Moody's withdrew Vanke's investment-grade rating of Baa3 and assigned a non-investment grade rating of Ba1. The previous Baa3 was the lowest level within Moody's investment-grade ratings. Additionally, Ba1 and below are considered non-investment grade. Moody's is also considering further downgrades in the future.

Kaven Chang, Senior Vice President at Moody's, explained, "The downgrade reflects expectations that credit metrics, financial flexibility, and liquidity buffers will weaken over the next 12 to 18 months." Moody's also pointed out increasing uncertainty regarding Vanke's access to funding amid a sharp decline in sales.

This move is expected to further heighten concerns surrounding the Chinese real estate market. China’s real estate market has been in recession due to overlapping issues such as management difficulties faced by major companies like Evergrande (恒大·Evergrande) and Country Garden (碧桂園·Country Garden), as well as plummeting housing prices. Earlier, Fitch Ratings also downgraded Vanke's credit rating from BBB+ to BBB, citing weaker-than-expected sales. Separate reports indicated that Chinese authorities requested major banks to provide financial support to alleviate Vanke's liquidity issues, but these banks did not approve large-scale syndicated loans.

However, Vanke responded to the downgrade by stating that "operational fundamentals are normal" and "financial channels such as refinancing are also normal." Vanke is effectively considered a state-owned enterprise as Shenzhen Metro, under the supervision of the Guangdong Province Shenzhen State-owned Assets Supervision and Administration Commission, holds a 33% stake.

This content was produced with the assistance of AI translation services.