Yuzhou IR Says Company Has Unutilized Credit Line of RMB 39B as of Mid-2021, Credit Metrics Will ‘Continuously Improve’ Going Forward

An investor relations representative of Yuzhou Properties has sent a message to investors today, Oct. 20, responding to a Moody’s downgrade on Oct. 19 to B2 from B1, stating that Yuzhou acknowledges the concerns raised by the rating agency, further stating that it has repaid all onshore and offshore bonds matured in this year. Continue reading for our Asia Core Credit team's reporting on Moody's Yuzhou ratings downgrade and request a trial for reporting and analysis on hundreds more stressed, distressed and performing credits in China. 

Moody’s downgrade with a negative outlook is based on weakened funding access and expectation of decline in contracted sales and liquidity buffer over the next 12 month, according to the rating agency’s press release accompanying the ratings action.

Yuzhou acknowledges the concerns raised by the rating agency and states that it has repaid all onshore and offshore bonds matured in this year. The company further stated in the announcement that in the future, its revenue-to-total debt ratio and other rating indicators would only improve and expects to meet all the “​​three red lines” by the end of this year.

As of mid-2021, Yuzhou has an unutilized credit line of RMB 39 billion ($6.1 billion) and obtained a new credit line totalling RMB 7.65 billion within this month (October), an increase compared to 2020, according to the statement..

In the statement, Yuzhou reiterated it has never had any commercial bills or wealth management products, and its majority shareholders have not sold or pledged a single share since its listing.

Yuzhou has so far “bought back a total of $51.05 million offshore bonds” using cash on hand. Chairman Lam Lung On has purchased an additional 3 million company shares in the open market on Oct. 15, the announcement states.

As reported, Yuzhou said in a statement earlier this month that it has so far bought back a total of $45.5 million offshore bonds using cash on hand, and Chairman Lam Lung On has purchased an additional 8.3 million company shares in the open market in a bid to bolster prices.

Yuzhou states in the announcement: “It is expected that the annual recognised revenue will reach RMB 27 billion, increasing significantly year-on-year. The group consolidated revenue to date is RMB 12 billion, according to Bloomberg’s consensus.” In October, sales reached RMB 3.6 billion, which is in line with expectation. In the second half of the year, saleable resources amounted to RMB 130 billion, meaning it only needs to achieve a 45% sell-through rate to meet its full-year target, the message details.

Yuzhou only acquired four land parcels in this year, located in Suzhou, Zhengzhou and Greater Bay Area with an attributable land cost of RMB 2.1 billion and the corresponding acquisition cost has been repaid in the first half of this year, the messages states.

Below is Yuzhou's capital structure: