In latest Moody's analysis, Greenland Holding Group, parent of Atlantic Yards developer (for now), retains near-bottom credit rating and negative outlook

Not only is the conglomerate Greenland Holding Group, parent of Atlantic Yards developer (for now) Greenland USA, dropping in both the Fortune Global 500 and Forbes Global 2000, the credit rating agency Moody's is notably unenthusiastic.

On April 1, it announced it had conducted a review of Greenland's Ca corporate family rating (as well as associated companies), and said the rating and the negative outlook remain unchanged.

Ca is second-lowest in Moody's eleven-notch category of junk, described as "obligations likely, or very near, default, with some prospect of recovery in principal and interest." (The bottom rung, C, offers "little prospect" of recovery.)

The downgrade to Ca, as I wrote, was in July 2023.

Tough times

"Greenland Holding's Ca corporate family rating (CFR) reflects the company's weak liquidity with history of payment default, and our expectation of weak recovery prospects for Greenland Holding's bondholders," said Moody's, noting that the chance of creditors recovering could be even lower "if the company experiences a wider default of its debt and runs into a liquidation scenario."

In an April 28 Update to credit analysis (which is not public but which Moody's shared with me), the agency said Greenland's strengths (large operations with geographic and product diversification in China) were offset by its challenges (weak liquidity with history of payment default, and weak financial metrics).

Moody's noted that Greenland had declined to participate in the Credit Rating process, and had not provided Moody’s with access to its books, records and other internal documents. (Typically companies pay for ratings, but in this case it seems Greenland did not, as the rating would not be flattering.)

The Moody's chart below shows steadily rising debt and steadily declining EBIT (earnings before interest and taxies), which is an ominous sign. 

Screenshot from Moody's report

Sluggish times

Greenland undoubtedly seeks cash, which may be why they're eager to sell--or have sold--a majority share of their remaining holdings in Brooklyn, while keeping a junior stake in Atlantic Yards/Pacific Park. 

(That's an argument that Greenland could afford to pay $1.75 million a month in penalties for unbuilt affordable housing.)

"We expect the company's reducing internal cash resources — a result of declining contracted sales and constrained funding access — to be inadequate to fully address its debt refinancing needs over the next 6 to 12 months," said Moody's.

After all, in September 2023, Greenland announced it couldn't pay off debt, and subsequently extended the maturity of all of its outstanding offshore bonds by four years. 

Greenland, observed Moody's, will have to rely on asset disposals--hmm, like in Brooklyn?--or other fundraising plans for pay off debt, which the ratings agency called activities with "high uncertainties."

Greenland's contracted sales have dropped steadily over the last two years, and that should continue, "due to weak homebuyer confidence and credit stress" of the parent company, according to Moody's.

Adjusting the score

Based on Greenland's projected financials for the next year or so, the firm deserved a more optimistic  B3 rating, said Moody's.

However, the final rating of Ca took "into consideration the company's weak liquidity with history of payment default, and the weak recovery prospects" for creditors if the firm goes bankrupt. Also, noted Moody's, Greenland's high revenue is misleading because the construction business offers limited profit.

Ownership

As of Sept. 30, 2024, noted Moody's, the Shanghai State-owned Assets Supervision and Administration Commission effectively owned 46.37% of Greenland Holding stock. (Management also has a slice, as I've written, though I'm not sure how much that's changed.)

So even though the firm is publicly traded, it's essentially state-controlled, given the consonance of management and government interests.