Greenland Holding gets S&P credit rating lifted from Selective Default, but "high repayment risk" persists

Just a week after downgrading Greenland Holding Group (aka Greenland Holdings) to SD (Selective Default), ratings agency Standard & Poor's has upgraded the Shanghai-based conglomerate three notches to CCC-, but said the outlook remained negative.

Greenland is the parent of Greenland USA, which owns nearly all of Greenland Forest City Partners, the master developer of Atlantic Yards/Pacific Park, and has funding responsibility for nearly all going forward. And default might--though that's unclear--stall the project.

In a 6/29/22 announcement, S&P based the upgrade on Greenland's completion of a "distressed maturity extension," which means the company has one more year, until 6/25/23, to pay back $500 million in bonds.

Risks remain

But it warned that the company still "faces high repayment risk," given general lack of available cash and other debt due this year. CCC- is an "extremely speculative" low grade of "junk" bonds, defined by S&P as:

Speculative Grade: Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments

Below that are CC and C. Greenland, before being downgraded to SD, was at CC.

Rival ratings agency Moody has also downgraded Greenland, but not as deeply as has S&P.

In response to the S&P action, Reuters reported, Greenland declined to comment.

How to raise cash

S&P noted:

Greenland's repayment ability will largely depend on cash collection from sales and asset disposals. However, sales remain hindered by weak sentiment in the property market. The company's contracted sales in the first quarter of 2022 were down 56% to RMB30.8 billion. While the company plans to dispose a material amount of assets over the next three years, execution risk exists, and disposals may not be timely for its near-term debt maturities due in 2022.

The "sales" refer to domestic sales in China.

Greenland USA has said it is not affected by the parent; it has just raised funds, presumably for the first phase of the Vanderbilt Yard platform, by selling the two "100% affordable housing" buildings, 535 Carlton and 38 Sixth, in which it had a 70% share with original developer Forest City.

There's not much else to sell--except future development rights, such as to Site 5, the parcel long occupied by Modell's and P.C. Richard, which could command a significant sum if/when the developer gets New York State to agree to a transfer of bulk from the unbuilt B1 tower, once planned to loom over the arena.

That process has not yet started, but has been percolating since 2015.