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Investing.com -- Chinese homebuilder Longfor Group Holdings Limited has been downgraded by Fitch Ratings from ’BB’ to ’BB-’ with a Negative outlook.
The rating action reflects Longfor’s continued decline in property sales, which has put pressure on its cash flow and liquidity. Fitch projects the company’s contracted sales will fall by 30% in 2025 and another 20% in 2026, following weaker-than-expected performance so far this year.
For the first five months of 2025, Longfor’s sales dropped 31% year-over-year to CNY29 billion, underperforming state-owned peers that have maintained more active land acquisition strategies in higher-tier cities.
The company’s focus on reducing debt has resulted in significantly fewer land purchases over the past three years, which Fitch believes has negatively impacted sales performance as existing projects are older and selling more slowly.
Longfor now faces CNY19 billion in unsecured debt maturities in 2025, with Fitch forecasting only CNY10 billion in operating cash flow for the year. The company is expected to seek an additional CNY10 billion in investment property-backed loans to address these obligations.
The maturity pressure is expected to ease significantly after 2025, with CNY5-6 billion due annually in 2026 and 2027, which Fitch considers manageable based on Longfor’s liquidity position.
Despite sales challenges, Longfor’s non-development segments continue to perform steadily, providing recurring cash flow. Rental income increased 2.5% year-over-year in the first five months of 2025, while other service-related income rose 2.4%.
The company’s large investment property portfolio, valued at approximately CNY200 billion, remains a key rating support factor, providing significant recurring income and supporting bank funding access compared to other property developers.
Fitch indicated the Outlook could be revised to Stable if Longfor’s contracted sales and free cash flow generation stabilize.
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