Chinese developer Longfor's bonds sink deeper into junk territory as home sales sputter
Beijing-based
Longfor Group is the latest firm to see its bonds downgraded further into junk territory, as weakening sales plague China's beleaguered property developers despite the central government's recent support measures to revive confidence.
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S&P Global Ratings on Wednesday downgraded Longfor's long-term issuer credit rating to BB from BB+ and its senior unsecured notes to BB- from BB, citing concerns that the company's contracted sales could remain under pressure through next year due to a further depletion of saleable resources.
The company's contracted sales could decline a further 13 per cent this year to 89 billion yuan (US$12.3 billion), the ratings agency said. Longfor's gross profit margin from property development was expected to remain suppressed at 5 to 6 per cent, down from 11 per cent in 2023, as its focus on clearing inventory continued to weigh on profitability, S&P said.
'While we believe the company will be able to reduce adjusted debt of about 10 billion yuan each year in 2025 [and] 2026 using its growing rental and service income, weakness in property development will partially offset this,' wrote S&P analysts Wilson Ling and Edward Chan.
The downgrade comes as China's developers continue to struggle with lacklustre sentiment among homebuyers. The
property market crisis is now in its fourth year after Beijing introduced measures in late 2020 to deleverage developers and deflate a housing bubble.
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