On April 10, S&P Global Ratings downgraded the long-term issuer credit rating of Vanke (02202,000002.SZ) from “BBB+” to “BB+.”
The Zhitong Finance App learned that on April 10, S&P Global Ratings downgraded the long-term issuer credit rating of Vanke (02202,000002.SZ) from “BBB+” to “BB+”. The outlook is negative and it is “junk grade” or “non-investment grade.” Moody's and Fitch have previously downgraded Vanke's rating to “junk.”
S&P blamed Vanke's “weakening competitive position and soaring leverage ratio” for the downgrade. Although Vanke is expected to be able to repay its debts this year, S&P warned that due to the continued downturn in the Chinese real estate market, Vanke's sales may continue to decline in the next 12 months.
S&P believes that weak contract sales and profit margins will weaken Vanke's competitive position. S&P expects the company's total “contract sales” from 2024 to 2026 to drop to RMB 270 billion to RMB 280 billion, down 25%-28% from last year and 60% from the peak of RMB 704 billion in 2020. Vanke's financial position may also deteriorate if it fails to implement its asset disposal plan.
According to pricing, Vanke's short-term US dollar bonds due in June are priced at about 94 cents, indicating strong demand for repayment, while the price of notes due in 2027 is nearly 50% off of face value.
Notably, on March 11, Moody's took the lead in classifying Vanke as junk. Less than a week later, Fitch followed suit and downgraded Vanke's rating.