[RAM] RAM Ratings affirms Country Garden at B3/Negative

RAM Ratings has affirmed the B₃ rating of Country Garden Real Estate Sdn Bhd (CGRE or the Company)’s RM1.5 bil Islamic Medium-Term Notes Programme (IMTN or the sukuk). The long-term outlook on the rating remains negative. 

The affirmation reflects the Company’s weak credit profile and considerable liquidity risk arising from the sizeable principal payment of the sukuk due in March 2025. CGRE has relied on sales of previously unsold property to meet operating and financing obligations, with a tight cash buffer relative to maturing debts (the IMTN and other loans). Notwithstanding a more favourable operating environment, driven by government policies for the Forest City development and broader Johor region, the severe liquidity stress faced given the short remaining period left for cash collection and sales before the scheduled sukuk maturity remain our primary concern. Forest City is an integrated residential development of China-based developer Country Garden Holdings Company Limited (Country Garden or the Group), CGRE’s ultimate parent company.

CGRE has represented that its unencumbered cash balance of RM319 mil as of 11 November 2024 and an anticipated RM220 mil from completed property sales and other property transactions, coupled with other cost cutting measures, will enable it to meet the upcoming RM295 mil principal payment of the IMTN and other operating expenses. We remain cautious about these numbers, which we have not been able to fully verify. CGRE has started building up its Finance Service Account (FSA) on a proportionate basis for repayment, in accordance with the sukuk terms. The first two instalments totalling RM204.76 mil were paid into the FSA on 27 December 2024 and 27 January 2025, respectively.

Other downside risks also remain present, including uncertainties over the outcome of a petition to wind up the Group and a final debt restructuring negotiations – which we expect to be lengthy due to complexities involved – and its implications for CGRE.

The IMTN rating still takes into account the ‘close’ parent-subsidiary linkage between CGRE and the Group (previously assessed as ‘very close’). Our view of the relationship as “close” considers CGRE’s financial independence and legal separation from financial struggles at Country Garden, to a certain degree, following the approval of revised key sukuk terms in May 2024. Among these include the removal of a cross-default clause, deletion of the guarantor’s breach of obligation clause, the imposition of restrictions on distribution, and the provision of additional security.

The establishment of the Forest City Special Financial Zone and the duty-free status given to Forest City have begun to translate to some positive developments for CGRE, as seen in the encouraging take-up of the project’s shop lots. Danga Bay, Country Garden’s waterfront development near Johor Bahru, also recorded increased take-up rates and property prices, benefiting from its close proximity to the near-complete Johor Bahru-Singapore Rapid Transit System. However, these are early signs still and any meaningful upside remains to be seen. The lack of a longer track record of stable cashflow generation, high inventory levels, presence of significant shareholder advances with still evolving restructuring negotiations remain key rating moderators. 

We will continue to monitor developments closely, reassess the Company’s liquidity position and make necessary updates when definitive details become available.


Analytical contacts
Wong Ee Loo 
(603) 3385 2521
eeloo@ram.com.my

Thong Mun Wai 
(603) 3385 2522
munwai@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my