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S&P sees further downgrades for developers (3)

By Sophie He  (China Daily)

08:22, September 21, 2012

"Although the year-to-date sales in 2012 have improved for most rated Chinese developers, we haven't seen any meaningful de-leveraging activities in the sector," said Fu.

"Most developers would rather use cash to purchase land rather than pay down their debts."

She also warned that Chinese developers need to be more disciplined about their financial position, after noticing what she called some "very aggressive balance sheets".

In a recent report, S&P highlighted the example of Sunac China Holdings Ltd, which has acquired 10 projects from Greentown China.

Although better fund flow has been reported to have helped Greentown China's liquidity, the financial and operational burden on Sunac is likely to weigh on its credit profile in the near term, said S&P.

Although the ratings agency said it expects to publish some negative ratings on Chinese developers in the next six months, the number is likely to be lower than in the past 12 months.

It also expects some positive rating actions, and a lower likelihood of default.

"We are less likely to see defaults because distressed developers such as Greentown China have improved their financial strength through asset sales," Fu said.

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