E-House (China) Enterprise Holdings Limited (Surveillance Report)

The Issuer Rating downgrade to ‘BB-’ reflects E-House (China) Enterprise Holdings Limited’s (“E-House” or “the company”) weakening credit profile and fluctuating financial metrics with the negative impact from the unexpected loss allowance on its account receivables. Additionally, the company encountered narrowed financing channels following the termination of the proposed equity financings, slower-than-expected revenue growth due to the compressed commission rates, and margin pressure in view of the expansion into low-margin business segments.

The Negative Outlook on E-House’s rating reflects our expectation of E-House’s increasing exposure to the counterparty risk for its account receivables, which would adversely affect its operating cash flow in the next 12-18 months. We would revise the Rating Outlook to Stable when there is a clearer sign on the resolution of the recovery of E-House’s account receivables, and demonstrated effort to sustainably manage its leverage level and liquidity position.