(Yicai Global) Oct. 19 -- Seven Chinese real estate giants had their credit ratings downgraded or outlooks changed by US credit rating agency Moody's yesterday, the most ever in 24 hours, making it more difficult for them to borrow money to repay their debts.

Greenland Holdings, Yango Group, China Aoyuan, Kaisa Group, Shinsun Holdings Group, R&F Properties and Zhongliang Holdings were downgraded mainly due to concerns over liquidity risks because of poor sales and financing prospects, New York-based Moody’s said.

Out of the seven, only one, Guangzhou-based R&F Properties, is heavily leveraged with its capital-to-debt ratio outside the ‘red lines’ set by regulators last year. The rest are all within the sector’s leveraging limits and have not been flagged before as at risk of default.

The downgrading of a large number of real estate firms, some of which have relatively large assets, is an indication of the growing deterioration in their credit quality, said Yan Yuejin, research director at think tank E-house China R&D Institute. Although there is still room for policy adjustments, it will take some time for new policies to take effect and boost corporate financial data, he added.

Multiple rating downgrades will affect the financing activities of real estate firms, according to EH Consulting. A lowered rating outlook usually means that the company's financial indicators have deteriorated or are expected to deteriorate.

Greenland had its ratings slashed as the Shanghai-based firm is likely to have to dip into its own cash reserves to repay debts maturing in the next six months to one year, as it becomes harder to issue offshore bonds at a reasonable cost and as sales slide due to an erosion in home buyers’ confidence, Moody’s said. As a result, Greenland’s credit metrics, cash flow and liquidity will weaken.

The recent default by developer Fantasia Holdings Group of a USD206 million US dollar bond was triggered by a sudden and unexpected credit downgrading by S&P Global Ratings. This led to severe restrictions on domestic and foreign financing which resulted in a phased liquidity crisis, founder Zeng Baobao said on Oct. 8.

Moody’s move will raise concerns about more defaults by Chinese developers. USD8 billion of maturing debt needs to be repaid before the end of the year and another USD54.8 billion will be due next year, according to CRIC Securities.

Editor: Kim Taylor