LVGEM (China) Real Estate Investment Company Limited (Surveillance Report)

Lianhe Global downgrades LVGEM (China) Real Estate Investment Company Limited’s global scale Long-term Issuer and Issuance Credit Ratings to ‘B’ from ‘BB-’; on Rating Watch Negative

The Issuer Rating downgrade to ‘B’ reflects LVGEM’s increasing refinancing pressure as it faces a tall maturity wall in both its offshore USD notes and certain onshore RMB bonds that are coming due in 2023, which puts constraint on its liquidity. The Issuer Rating also reflects LVGEM’s established track record of above-average profit margin and its focus on the Greater Bay Area (GBA), including the Baishizhou project which so far marks the record-large redevelopment project in Shenzhen. However, LVGEM’s rating is constrained by its modest business franchise in terms of contracted sales scale and significant concentration risks given its land bank locations and revenue drivers relying on the limited number of projects under development.

The RWN reflects our expectation of LVGEM’s exposure to short-term repayment burden, which puts pressure on its liquidity and heightens the uncertainty on its current financing situation which could impact its repayment capability. We would remove the RWN when the company has demonstrated its capability to manage its maturing financial obligations in the near to medium terms.