Research: Rating Action: Moody’s downgrades Redsun to Caa1/Caa2; outlook remains negative

Hong Kong, June 30, 2022 — Moody’s Investors Service has downgraded Redsun Properties Group Limited’s corporate family rating (CFR) to Caa1 from B3 and the company’s senior unsecured rating to Caa2 from Caa1.

The outlook remains negative.

“The downgrade reflects Redsun’s heightened refinancing risks driven by its weak operating cash flow, weakened liquidity and sizable debt maturities over the next 6-12 months,” says Cedric Lai, a Moody’s Vice President and Senior Analyst.

“The negative outlook reflects the uncertainties over the company’s ability to address its refinancing needs amid a tight funding environment,” adds Lai.


Moody’s expects Redsun’s contracted sales to decline by around 40% year over year in 2022 to RMB55 billion amid weak consumer sentiment and tight funding conditions. The weak contracted sales will reduce the company’s operating cash flow and, in turn, its liquidity. Redsun’s contracted sales significantly fell 61% to RMB15.5 billion in the first five months of 2022 compared with the prior year.

Redsun will have sizable offshore debt maturities, including USD250 million of bonds due in October 2022 and USD455 million in April 2023. Moody’s assesses Redsun’s liquidity to be weak and that the company’s projected operating cash flow and cash on hand will be insufficient to meet all of Its payment obligations over the next 12-18 months, absent any new fundraising amid the tough funding environment.

The company’s investment property portfolio will provide an alternate source of liquidity, as the company could sell some of these properties to meet its debt obligations if needed. However, asset sales are highly uncertain in the current difficult operating environment.

Moody’s forecasts Redsun’s debt leverage, as measured by revenue/adjusted debt, will decline to 55%-60% over the next 12-18 months from 63% in 2021, driven by slower revenue recognition. Similarly, its interest-servicing ability, as measured by EBIT interest coverage, will weaken to 1.5x-1.7x from 1.9x over the same period, by the expected declining margin.

Redsun’s Caa1 CFR reflects the company’s long operating history in developing mass residential properties in Jiangsu province. However, the rating is constrained by the company’s weak liquidity, modest credit metrics and significant exposure to its joint venture (JV) businesses, which increases its contingent liabilities and weakens its corporate transparency.

The Caa2 senior unsecured debt rating is one notch lower than the company’s CFR due to structural subordination risk. This risk reflects the fact that the majority of claims are at the operating subsidiaries and have priority over Redsun’s senior unsecured claims in a bankruptcy scenario. In addition, the holding company lacks significant mitigating factors for structural subordination. As a result, the expected recovery rate for claims at the holding company will be lower.

In terms of environmental, social and governance (ESG) considerations, Redsun’s CFR considers the company’s concentrated ownership by its key shareholder, Zeng Huansha, who held a 72% effective stake as of the end of 2021. Moody’s has also considered the presence of three independent nonexecutive directors on Redsun’s seven-member board, and the presence of other internal governance structures and standards as required by the Corporate Governance Code for companies listed on the Hong Kong Stock Exchange.


An upgrade is unlikely, given the negative outlook.

However, positive rating momentum could emerge if Redsun improves its liquidity and access to funding, and strengthens its sales, profitability and credit metrics over the next 12-18 months.

On the other hand, Moody’s could downgrade Redsun’s ratings if its liquidity deteriorates further.

The principal methodology used in these ratings was Homebuilding And Property Development Industry published in January 2018 and available at Alternatively, please see the Rating Methodologies page on for a copy of this methodology.

Redsun Properties Group Limited was founded in 1996 and listed on the Hong Kong Stock Exchange in July 2018. Its headquarters are in Shanghai and Nanjing.

The company engages in real estate development, commercial properties and hotel operations in China. As of the end of 2021, its saleable resources totaled 18.8 million square meters in gross floor area, spread across over 60 cities in China.


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Cedric Lai
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong,
China (Hong Kong SAR)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Franco Leung
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Release Office:
Moody’s Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
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China (Hong Kong SAR)
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