Investing.com -- Moody’s Ratings has confirmed Sunoco LP’s Ba1 corporate family rating, Ba1-PD probability of default rating, and Ba1 senior unsecured notes rating, while changing the outlook to stable from ratings under review. The confirmation concludes the review for downgrade that began on May 5, 2025. Sunoco’s speculative grade liquidity rating remains unchanged at SGL-2. Moody’s noted that Sunoco’s Ba1 rating benefits from its investment grade scale, large operating footprint, and contracted pipeline and storage earnings that provide diversification to its wholesale fuel distribution business. The pending $9.3 billion acquisition of Calgary-based Parkland Corporation expands Sunoco’s wholesale distribution operations into Canada and the Caribbean. The deal received approval from Parkland’s shareholders in June and awaits Canadian regulatory approvals, expected in the fourth quarter of 2025. Post-acquisition, Sunoco will become one of North America’s largest motor fuel distributors. However, the rating is constrained by elevated debt leverage and exposure to fuel volume risk, which makes the company vulnerable to market demand shifts and long-term decline in fuel consumption. Sunoco’s debt/EBITDA ratio of 4.7x (including Moody’s standard adjustments and pro forma for the acquisition) exceeds the 4.5x downgrade threshold. The company has identified synergies through cost reductions and commercial opportunities that should reduce leverage to 4.4x by year-end 2026, with further deleveraging likely in 2027. Moody’s expects Sunoco to remain acquisitive, particularly for logistics assets supporting its distribution business, while adhering to its long-term leverage target of 4x. The company maintains good liquidity with a fully undrawn $1.5 billion unsecured revolving credit facility as of March 31, 2025. Upcoming debt maturities include $500 million notes due in June 2026 and a $550 million issue in 2027. The Parkland acquisition is expected to be funded with a mix of long-term debt, preferred and common equity issuance. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Sure, there are always opportunities in the stock market – but finding them feels more difficult now than a year ago. Unsure where to invest next? One of the best ways to discover new high-potential opportunities is to look at the top performing portfolios this year. ProPicks AI offers 6 model portfolios from Investing.com which identify the best stocks for investors to buy right now. For example, ProPicks AI found 9 overlooked stocks that jumped over 25% this year alone. The new stocks that made the monthly cut could yield enormous returns in the coming years. Is SUN one of them?

Investing.com -- Moody’s Ratings has announced a downgrade of Azul S.A.’s corporate family rating (CFR) to Ca from Caa2. The downgrade extends to Azul Secured Finance LLP and Azul Investments LLP, with the rating of the backed senior secured first lien debt due 2028, the backed senior secured debts due 2029 and 2030, and the backed senior unsecured debt ratings all downgraded to Ca from Caa3. The superpriority notes due 2030 and the exchanged first-lien notes due 2028 of Azul Secured Finance LLP have also been downgraded to Ca from Caa1. The outlook for all issuers remains negative. This downgrade comes in the wake of Azul’s filing for voluntary protection under the U.S. Chapter 11 financial reorganization process. Moody’s has cited some prospects for recovery for existing secured and unsecured creditors as a rationale for the downgrade. As part of its restructuring process, Azul anticipates approximately $1.6 billion in financing, the elimination of over $2.0 billion of debt, and potential further equity financing of up to $950 million upon emergence. The restructuring plan includes a secured commitment for debtor-in-possession (DIP) financing of approximately $1.6 billion from key financial partners, which will repay some of the company’s existing debt and provide around $670 million of new capital to enhance liquidity during the restructuring process. Upon emergence, Azul plans to repay the DIP financing with the proceeds of an equity rights offering of up to $650 million, supported by these financial partners and potentially further supported by an additional equity investment of up to $300 million from United Airlines and American Airlines (NASDAQ:AAL), subject to certain conditions. The CFR, secured rating, and unsecured rating were equalized at the same level, indicating the filing and Moody’s view that recovery prospects could vary among similar debt classes. The negative outlook reflects Moody’s view of a prolonged recovery period for Azul as part of the reorganization and its limited financial flexibility, which is expected to result in losses to secured and unsecured creditors. These ratings will be withdrawn shortly following the filing for Chapter 11, as per Moody’s Ratings’ Withdrawal of Credit Ratings Policy. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

In this week's issue of our environmental newsletter: we look at why credit ratings are a big deal for climate-vulnerable nations; check out some options for greener gifting; and meet a robot that's h...

LONDON (Reuters) - Credit ratings giant S&P Global has said it is reviewing all its macro economic forecasts in the wake of Donald Trump’s sweeping world trade tariffs this week, a move likely to fuel concerns of a renewed wave of credit score downgrades. The firm, whose ratings judge the creditworthiness of thousands of companies and more than 130 countries, said the scope and size of U.S. President Trump’s new tariffs had exceeded most expectations. It said it would publish its revised forecasts next week, although initial assumptions include a jump in U.S. inflation that leaves it closer to 4% by the end of the year compared with the 3% it had previously factored in. The impact on U.S. GDP will depend on the level of retaliation from its trading partners and how the tariff revenues get used, especially if they fund tax cuts, S&P said. Even in a scenario where there are tax cuts, and there is "relatively modest" retaliation though, GDP growth was still likely to be three-tenths to four-tenths of a percentage point lower than S&P’s most recent forecasts. "We still don’t see a NBER-defined recession (depth, duration, and broad dispersion of weakness, not just two consecutive quarters of negative growth) in the next 12 months," its analysts said in a report. "But we acknowledge that the subjective probability of a recession within that time period has now likely moved up to 30%-35% from 25% in March." The rest of the world is also likely to see growth forecasts cut. Large economies such as the euro zone and China are likely to see smaller adjustments, at around one quarter of a percentage point per year, whereas more open economies that trade heavily with the U.S. are likely to see larger revisions. "This is the case, for example, of Ireland and Switzerland in Europe and the Tiger economies in Asia-Pacific," S&P said. S&P did not give any predictions of rating moves, but its peer Fitch cut China’s rating on Thursday and debt insurance costs have already risen for firms and countries seen as vulnerable on the assumption that there will be a wave of downgrades. S&P’s analysts said they expected other countries to respond to the tariff moves in a number of ways. Some are likely to target perceived vulnerable U.S. industries and political districts rather than go for blanket tariffs, while some could use non-tariff measures and measures impacting services and goods flows. "These potential countermeasures would put further downside pressures on growth," S&P said. Which stock should you buy in your very next trade? AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

Investing.com -- Moody’s Ratings has downgraded Dah Sing Bank, Limited’s long-term foreign and local currency deposit ratings to A3/P-2 from A2/P-1, with a stable outlook. The rating agency also lowered the bank’s Baseline Credit Assessment (BCA) and Adjusted BCA to baa1 from a3, along with downgrading several other ratings including its Counterparty Risk Assessment and Counterparty Risk Ratings. According to Moody’s, the downgrades reflect deteriorating asset quality at the Hong Kong-based bank, primarily due to weakness in the commercial real estate (CRE) sector in Hong Kong SAR, China. The outlook has been changed to stable from negative, considering several factors that could help buffer against further asset quality pressure over the next 12-18 months. These include well-secured collateral for a significant portion of the bank’s lending to property developers, improved profitability and capital adequacy, and stable funding and liquidity. Moody’s expects continued strain on the asset quality of the bank’s Hong Kong CRE exposures over the next 12-18 months, citing the high interest rate environment, high vacancy rates, increasing office supply, and declining rental yields. Loans to CRE made up 21% of the bank’s gross loans as of end-2024. The credit impaired ratio for loans to property investment jumped to 8.98% at end-2024, compared to 1.98% at end-2023. This contributed to an increase in the bank’s overall impaired loans, which rose to 3.21% of gross loans at end-2024 from 1.94% at end-2023. Stage 2 loans also increased to 13.6% of total loans at end-2024, up from 8.2% at end-2023, primarily driven by CRE-related loans. Moody’s anticipates more stage 2 loans will become impaired loans, resulting in higher asset risk. The bank’s profitability is expected to remain stable in 2025, supported by an improved net interest margin and higher non-interest income from bancassurance and trading activities. This should offset some negative impact from increased loan loss provisions. The bank’s return on average assets improved to 0.8% in 2024 from 0.7% in 2023. Capital position is projected to remain good over the next 12-18 months due to muted growth in loans and risk-weighted assets. The Common Equity Tier 1 ratio increased to 16.9% at end-2024 from 16.2% at end-2023. Funding and liquidity are expected to remain sound, with the bank primarily funded by retail customer deposits. As of end-2024, approximately 90% of its total liabilities were customer deposits, a level that was high among its peers. Moody’s could upgrade Dah Sing Bank’s ratings if the bank reduces its CRE exposure, improves asset quality with problem loans below 1.5% on a sustained basis, strengthens capital adequacy, maintains sound profitability, and preserves a good liquidity profile. Conversely, a downgrade could occur if capitalization falls significantly, asset quality deteriorates further with impaired loan ratio exceeding 5%, or profitability declines substantially. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Financial adviser Jamie Doyle told the Perkiomen Valley Board on Dec. 8 that the district’s debt portfolio is short‑term and manageable, with roughly $78.35 million outstanding, a net local effort of about $10.3 million per year and an S&P rating of AA; Doyle said refinancing opportunities are limited given historically low rates on existing issues.

Investing.com -- Moody’s Ratings has upgraded the ratings of Steelcase Inc (NYSE:SCS)., including its Corporate Family Rating (CFR) to Ba1 from Ba2, and the Probability of Default Rating (PDR) to Ba1-PD from Ba2-PD. The rating on the company’s senior unsecured notes due 2029 has also been upgraded to Ba2 from Ba3. The speculative grade liquidity rating remains unchanged at SGL-1, while the outlook has shifted from positive to stable. The ratings upgrade is a reflection of Steelcase’s solid credit metrics, low financial leverage, and strong liquidity, supported by a healthy and expanding cash balance, a low net funded debt position, and a forecast for continued positive annual free cash flow generation. The company’s organic order performance in the fiscal year ending February 2025 and its expectations for organic revenue growth in fiscal 2026 suggest a stabilization of revenue. In the fourth quarter of fiscal 2025, Steelcase reported an organic order growth of 9%, primarily driven by the Americas, its largest segment, which saw a good order growth of 12%. Despite a 3% decline in the company’s organic revenue during the quarter, the backlog increased by 11% compared to the same period last year. For the full fiscal year 2025, Steelcase reported flat year-over-year organic revenue and company-adjusted EBITDA. The stable revenue and earnings contributed to a positive free cash flow of around $54 million (after dividends) in fiscal 2025, and the company’s debt/EBITDA leverage is low at 2.2x at the end of fiscal 2025, or around 1.0x net of cash. Steelcase anticipates organic revenue growth in the mid-single digit percentage range and modest operating margin expansion in fiscal 2026. This is expected to be supported by a healthy beginning backlog and a stable macroeconomic environment. The company is also forecasting improved profitability in the international segment, which it expects to break even for the full fiscal 2026 year. Moody’s expects that Steelcase will continue to maintain solid credit metrics including debt/EBITDA in the low 2x range with very good liquidity and low net debt over the next 12-18 months. However, there are potential downside risks due to challenges in the office space market, including high vacancy rates and macroeconomic uncertainty related to US tariffs that could negatively impact business confidence and lower volumes in the contract office furniture industry. Steelcase is planning to offset increased costs related to tariffs with pricing actions, including a tariff recovery charge in the Americas. Moody’s believes there is a risk that these actions may not fully mitigate the additional costs and that actions such as price increases may result in volume declines. They anticipate the EBITDA margin will remain flat over the next 12-to-18 months in their base case projections, but margin risks are weighted toward the downside. The company’s Ba1 CFR credit profile reflects its leading market share and strong brands in office furniture, good end market diversification, and good geographic reach in North America, Europe, and Asia. Despite secular shifts toward remote work and less office space demand, offices will remain an important contributor to workplace culture and collaboration. Steelcase’s susceptibility to revenue cyclicality in economic downturns, as well as its moderate size with a low EBITDA margin, constrain the credit profile. The company’s low financial leverage with debt/EBITDA at around 2.2x at the end of fiscal year 2025 and very good liquidity provides good financial flexibility to invest and navigate office space market uncertainties and supports the rating. Steelcase’s business is exposed to an office space market that remains challenging with low new construction activity and high vacancy rates. The company’s revenue and EBITDA remain below pre-pandemic levels, and office space demand is expected to remain well below pre-pandemic levels for the foreseeable future due to the secular shift towards remote work. The company’s business strategies have led to acquisitions that amidst a shifting demand landscape may add event risk, while also increasing its revenue and earnings base. The stable outlook reflects Moody’s expectation that Steelcase will maintain good credit metrics with low net debt and very good liquidity over the next 12-18 months, which provides good financial flexibility to navigate the ongoing challenging office space market and macroeconomic uncertainty. The ratings could be upgraded if Steelcase meaningfully and sustainably increases the EBITDA margin to the low-to-mid teens percentage range, and generates strong and consistent positive free cash flow generation, and maintains conservative financial policies that support low leverage and very good liquidity. A ratings upgrade would also require a track record of organic revenue growth and stability and sustained growth visibility in the office space sector. The ratings could be downgraded if the company reports ongoing lower organic revenue, or the operating profit margin declines due to factors such as lower demand in the office furniture market, volume or market share losses, rising costs, or tariffs, or if debt/EBITDA is above 3.25x. Additionally, a downgrade could occur if liquidity deteriorates such as a meaningful reduction in the cash and short term investments position or free cash flow generation remains low. A shift in the company’s financial policies to less conservative practices such as distributing meaningful cash to shareholders or completing large debt-financed acquisitions could also lead to a downgrade. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

An unidentified speaker said the city closed a $35.6 million general-fund shortfall and reduced the next year's projected deficit from $52.9 million to $25.2 million, while protecting core services and securing top-tier bond ratings with a clean audit.

Investing.com -- AM Best, the global credit rating agency, has confirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" (Excellent) for Sun Hung Kai Properties Insurance Limited (SHKPI), based in Hong Kong. The outlook for these credit ratings remains stable. The credit ratings assigned to SHKPI are a reflection of the firm’s strong balance sheet, its robust operating performance, a neutral business profile, and appropriate enterprise risk management. The company’s balance sheet strength is considered very strong, bolstered by its risk-adjusted capitalization, which was at its highest point at the end of the fiscal year on June 30, 2024. Over the years, SHKPI has been increasing its investments in cash and cash equivalents. The company’s bond portfolio has also shown an enhancement in credit quality, following efforts to reduce the majority of its bond exposure to China’s real estate sector. Given SHKPI’s careful investment strategy, AM Best believes the firm’s capital level can adequately absorb investment risks. Other factors supporting the firm’s strong ratings include a robust liquidity position, a healthy solvency ratio, and a suitable reinsurance program. SHKPI has consistently demonstrated a strong operating performance in recent years, largely due to its superior underwriting profitability compared to industry competitors. In the fiscal year 2024, the firm’s double-digit return-on-equity ratio was a result of favorable underwriting experience and improved investment performance. The company’s investment returns saw further improvement in the same fiscal year, thanks to a higher interest rate environment. The firm also continues to benefit from group business, which has better quality and minimal acquisition expenses, leading to favorable underwriting results. As a wholly owned subsidiary of Sun Hung Kai Properties Limited (SHKP), one of Hong Kong’s largest property development and investment conglomerates, SHKPI focuses on commercial business and employees’ compensation insurance. The company benefits from its parent company’s network to underwrite a significant portion of its business from associated and subsidiary companies, while maintaining a low acquisition cost business model. Although SHKPI holds a modest share of Hong Kong’s general insurance sector, it has managed to maintain its market position profitably, largely due to its group-related businesses. However, negative rating actions could occur if there were a significant decline in SHKPI’s operating performance or a material deterioration in its risk-adjusted capitalization, for instance, due to substantial investment losses. While it is unlikely in the near term, positive rating actions could occur if there were a significant improvement in SHKPI’s balance sheet strength, for instance, due to further enhancements in its asset quality and capital size. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- S&P Global Ratings has downgraded Coronado Global Resources Inc. to ’CCC+’ from ’B-’ due to continued cash burn and uncertain liquidity. The downgrade, announced Monday, reflects the metallurgical coal producer’s high operating costs and coal prices below $200 per metric ton, which S&P believes will cause the company to continue burning cash in 2025. S&P also lowered the rating on Coronado’s senior secured debt to ’B-’ from ’B’ while maintaining a negative outlook on the company. Despite securing a new three-year $150 million asset-based loan facility (ABL) and other liquidity support, Coronado faces challenges with tightening quarterly covenants that will be difficult to meet without a sustained recovery in coal prices. The company’s current liquidity stands at approximately $315 million as of June end, consisting of about $240 million in cash and $75 million in undrawn capacity under the ABL. However, S&P expects Coronado to continue burning through about $10-20 million in cash monthly for at least the next three months. Coronado has drawn $75 million from its new ABL facility and obtained an additional $75 million prepayment under a new coal supply agreement with Stanwell Corp. Ltd. The Stanwell agreement also defers coal price rebate payments from April to December 2025, estimated at about $75 million over the seven-month period, which will become payable from 2027. S&P estimates that Coronado needs metallurgical coal prices above $220 per metric ton to break even at current operating costs. The company’s ability to slow its cash burn depends on operational improvements, including the successful ramp-up of the Mammoth underground and Buchanan expansion projects, which are expected to increase coal production by 2.5-3.0 million metric tons per annum. If Coronado can lower its operating costs to $90-95 per metric ton from the March quarter average of $113 per metric ton, and achieve its targeted $100 million in cost cuts, its break-even coal price would decrease to about $180 per metric ton. The company is reportedly exploring the sale of minority stakes in some assets to raise cash. From 2027, a new arrangement with Stanwell is expected to add approximately $150 million to annual cash flow. S&P could lower the rating further if Coronado’s liquidity position weakens due to higher cash burn from weaker coal prices or persistent high operating costs, potentially leading to a breach of ABL facility covenants. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. Before you buy stock in CRN, consider this: ProPicks AI are 6 easy-to-follow model portfolios created by Investing.com for building wealth by identifying winning stocks and letting them run. Over 150,000 paying members trust ProPicks to find new stocks to buy – driven by AI. The ProPicks AI algorithm has just identified the best stocks for investors to buy now. The stocks that made the cut could produce enormous returns in the coming years. Is CRN one of them?

S&P Global Ratings affirms Commercial Bank of Qatar at A-/Stable/A-2, citing strong capital levels, diversified funding and healthy liquidity. Bank also holds A2/Stable from Moody's and A/Stable from Fitch ratings.

Investing.com -- Moody’s Ratings has confirmed all ratings and assessments for United Bank, a subsidiary of United Bankshares (NASDAQ:UBSI), Inc. The affirmed ratings include the bank’s long-term and short-term local and foreign currency counterparty risk ratings of A3 and Prime-2, respectively. The bank’s long- and short-term local currency deposit ratings of A1 and Prime-1, respectively, and its long-term local currency issuer rating of Baa1 were also confirmed. The bank’s Baseline Credit Assessment (BCA) and adjusted BCA of a3 and long- and short-term Counterparty Risk Assessments of A2(cr) and Prime-1(cr), respectively, were also affirmed. Moody’s revised the bank’s long-term issuer and long-term deposit rating outlooks to stable from negative. The affirmation of United’s ratings and the modification of its outlook to stable is a reflection of the bank’s strong solvency position, which is demonstrated by good levels of capital and profitability that offset its asset risk. The bank’s record of asset quality and the successful completion and initial integration of Piedmont Bancorp, Inc. in the first quarter of 2025 also contributed to this decision. The bank’s 14.0% tangible common equity (TCE)/risk-weighted assets (RWA) as of December 31, 2024, and average net income/tangible assets of 1.31% between 2020 and 2024 also played a role. However, the bank’s concentrated loan portfolio, which has 3.2 times tangible common equity (TCE) invested in commercial real estate (CRE) loans, and lower liquid banking assets relative to similarly rated peers, balance these strengths. United’s commercial real estate portfolio is primarily concentrated in the Washington D.C. metro area, a market that has experienced stress for certain property types and classes. Despite this, the bank has shown a core competency in commercial real estate and construction lending, and its net charge-offs remain low compared to peers and the industry. United’s liquidity is a relative weakness, given its comparatively low levels of balance sheet liquidity compared to similarly rated peers. As of December 31, 2024, liquid banking assets to tangible banking assets stood at 19%. The affirmation also takes into account United’s core deposit funding, with 71% insured and collateralized deposits. This is sufficient at the current ratings level to offset funding pressures as depositors continue to switch to accounts that bear higher interest rates. While an upgrade is not likely over the next 12-18 months due to United’s stable outlook and relatively high rating, positive rating pressure could emerge if capital is meaningfully built, strong asset quality performance is demonstrated, and United’s commercial real estate concentration is significantly reduced. It will also depend on core deposit strength being maintained to support low use of market funding while liquid resources increase from current levels. United’s BCA and ratings could be downgraded if the holding company’s capital falls and is sustained below 12% of Moody’s-calculated TCE/RWA, profitability weakens on a sustained basis, asset quality deteriorates, or liquidity weakens. Ratings could also be downgraded if the bank’s deposit base markedly erodes or reliance on market funding increases. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- Moody’s Ratings has affirmed China Cinda (HK) Holdings Company Limited’s Baa2/P-2 local and foreign currency issuer ratings while changing the outlook to stable from negative. The rating agency also downgraded Cinda HK’s notional Baseline Credit Assessment (BCA) to b1 from ba3, according to a statement released Monday. Moody’s affirmed the Baa2 long-term local currency backed senior unsecured debt ratings and the (P)Baa2/(P)P-2 program ratings of China Cinda (2020) I Management Limited. The agency also maintained similar ratings for China Cinda Finance (2017) I Limited’s debt and the program ratings of China Cinda Finance (2015) I Limited and China Cinda Finance (2017) I Limited. These financing vehicles are guaranteed by Cinda HK, which is a wholly owned subsidiary of China Cinda Asset Management Co., Ltd. (Cinda AMC, Baa1 stable). The affirmation reflects Moody’s expectation that the very high level of support from Cinda AMC and indirect support from the Government of China (A1 negative) will remain stable. This support offsets Cinda HK’s weakened credit profile resulting from persistently weak profitability and capital adequacy. Cinda HK’s tangible common equity to risk-weighted assets ratio has remained negative since 2022, primarily due to goodwill from the 2016 acquisition of Nanyang Commercial Bank, Ltd. (NYCB, Baa1 negative, baa2) and sustained net losses from high impairment charges and elevated interest expenses. Despite these challenges, Moody’s expects Cinda HK to maintain sound liquidity with robust funding access from Cinda AMC, including substantial credit facilities from multiple financial institutions and offshore funding arrangements. The stable outlook reflects Moody’s expectation that NYCB’s relatively stable performance and continued strong liquidity support from Cinda AMC will mitigate pressures on asset quality and capital adequacy over the next 12–18 months. In February 2025, Cinda AMC announced that the Ministry of Finance will transfer its 58% stakes to Central Huijin Investment Ltd. While this transfer awaits regulatory approval, Moody’s believes Cinda HK’s credit profile could benefit from Central Huijin’s resources over the long term. The ratings could be upgraded if Cinda AMC’s issuer ratings are upgraded or if Cinda AMC provides a direct guarantee. Conversely, a downgrade could occur if Cinda AMC’s ratings are downgraded, if there are signs of weakening support from the parent, or if Cinda HK’s notional BCA is significantly downgraded. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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Investing.com -- On Wednesday, June 4, 2025, Fitch Ratings revised its outlook from Negative to Stable on the Long-Term Issuer Default Rating (IDR) of China-based Yuexiu Property Company Limited (YXP). The rating agency also affirmed YXP’s rating at ’BBB-’. This includes YXP’s senior unsecured rating, the ratings on the medium-term note program, and the notes under the program issued by Westwood Group Holdings Limited, all of which are guaranteed by YXP. The revision to a Stable Outlook is due to YXP’s proven ability to generate positive Fitch-defined cash flow from operations (CFO), even amidst declining contracted sales in 2024. Fitch anticipates that YXP’s sales will stabilize in 2025, backed by strong sales performance year to date and ongoing land replenishment, which ensures adequate quality sellable resources in higher-tier cities. YXP’s Standalone Credit Profile (SCP) of ’bb’ is attributed to its strong market position, moderate leverage, and robust funding access. However, the risk of a further downturn in the Chinese property market persists. YXP’s rating includes a two-notch uplift based on strong incentives to support from its parent, Guangzhou Yuexiu Holdings Limited (GYX), which is wholly owned by the Guangzhou municipality’s State-owned Assets Supervision and Administration Commission (SASAC). YXP’s contracted sales saw a decrease of 19% year-on-year to CNY114 billion in 2024, which was better than Fitch’s forecast of a 25% decline. Sales began to pick up in the fourth quarter of 2024, with strong sales momentum continuing into the first quarter of 2025. This was supported by continued stabilization in higher-tier cities and the company’s ongoing landbank replenishment, providing high quality saleable resources. Sales in the first four months of 2025 rose 37% year-on-year to CNY41 billion, making up 34% of its full-year target of CNY120 billion, a 5% year-on-year gain. Despite the sales decline, CFO improved in 2024 from 2023, due to stringent cash flow management. Fitch expects CFO to remain positive in 2025, with broadly stable construction and land acquisition costs. YXP’s net leverage rose to 47% by the end of 2024, up from 45% in 2023, despite positive Free Cash Flow (FCF), due to joint-venture consolidation and deconsolidation adjustments. However, Fitch expects net leverage to remain stable at a moderate level. In 2025, YXP’s inventory recycling, such as selling old inventory to local governments for social housing, will help the company improve its land bank quality. YXP returned three land parcels in Guangzhou to the government in 2024 in exchange for CNY13.5 billion in other land or land credit that can be used to acquire new land parcels in areas that can better meet market demand. YXP’s property development gross profit margin declined to 10% in 2024, down from 15% in 2023, as property prices fell. The company expects gross profit to remain weak in 2025, but improve gradually thereafter, as the proportion of sales generated from higher-cost inventory acquired before the industry downturn declines. YXP’s IDR benefits from a two-notch uplift based on the support of its parent, GYX. We assess the parent’s legal incentive to provide support as ’Medium’ in light of the guarantees on its onshore bonds, strategic incentive as ’Medium’ amid high financial contributions and operational incentive as ’Medium’, given management and brand overlap. YXP’s attributable sales scale is expected to be about 35% larger than Jinmao’s over the next two years. Both had similar sales scales in 2023, but Jinmao’s fell 32% in 2024, whereas YXP’s attributable sales declined by 14%. YXP’s better sales performance is due to its active land acquisition practices in key markets in recent years. YXP is less geographically diversified, with its home market of Guangzhou accounting for over 40% of total sales, but this is mitigated by its leading market position in the city and stronger property sales performance in its land bank markets. Fitch’s key assumptions within their rating case for the issuer include contracted sales remaining flat in 2025-2026, land acquisition costs at 35% and 40% of sales proceeds in 2025 and 2026, respectively, construction costs at 37% of sales proceeds in 2025-2026, EBITDA margin at 4%-6% in 2025-2026, and average funding cost of around 3.6% in 2025-2026. Factors that could lead to a negative rating action or downgrade include a sustained decline in contracted sales and/or sustained deterioration in CFO, net leverage above 55% for a sustained period, evidence of weakening funding access, or a perceived weakening in GYX’s incentive or ability to support YXP. On the other hand, factors that could lead to a positive rating action or upgrade include a clear trend of contracted sales growth, positive CFO on a sustained basis, or net leverage below 45% for a sustained period. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.