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S&P Global Ratings has cut credit ratings for two Chinese developers - Greenland Holdings Group and China Aoyuan Group Ltd. - with projects under construction in Canada.BRENDAN MCDERMID/Reuters

Two Chinese property companies with major Canadian condominium projects under development were hit with another credit downgrade this week, a sign of their weakening financial position amid China’s property-market downturn.

S&P Global Ratings cut Greenland Holdings Group’s credit to a B+ speculative rating from BB, meaning the developer is more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial obligations.

“The negative outlook on Greenland reflects our expectation that the company’s cash could continue to deplete over the next 12 months due to weaker sales and cash collection,” S&P said in a note accompanying the downgrade.

S&P also reduced China Aoyuan Group Ltd.’s debt assessment this week to B from B+, saying it expected the developer to have a harder time reducing its debt levels.

“We downgraded Aoyuan because we expect its deleveraging pace to slow amid a tough operating environment. The company’s reduced visibility on revenue growth and continued margin pressure will hinder deleveraging efforts,” S&P said.

Greenland has two large condo developments under construction in downtown Toronto. One project includes several skyscrapers near the lakeshore; and the other development involves 44-storey and 48-storey towers in the city’s entertainment district, according to its website.

S&P said the developer is facing a harder time raising capital and that will limit its ability to weather the industry downcycle that has been exacerbated by developer Evergrande Group’s US$300-billion debt problem.

In September, Moody’s Investors Service revised its outlook on Greenland to negative from stable, and said the company will “face uncertainty in issuing new offshore bonds at reasonable costs to refinance its maturing debt over the next 6-12 months.”

Like Greenland, Aoyuan is also under pressure to refinance its debt. A significant share of Aoyuan’s debt is maturing next year. S&P said the developer’s debt-reduction plans could include divesting projects.

Aoyuan is working on three major developments in Canada; a project in north Toronto that includes five condo towers and office and retail space; a project in Burnaby, B.C., that also includes five condo towers and office and retail space; and a 44-storey condo building in Surrey.

Aoyuan and Greenland are among many real estate companies developing condo buildings in Canada. The jump in home prices have shut many homebuyers out of the market. With house prices well above $1-million in the Toronto and Vancouver regions, more buyers have had to turn to condos, which typically have a lower purchase price.

Demand has been strong for Aoyuan and Greenland’s Toronto condos. According to industry research firm Urbanation Inc., some of their preconstruction buildings are more than 90-per-cent sold.

Industry research firm Urbanation said that overall the Toronto region’s new condo market is 91-per-cent sold. “These projects are reflective of the current state of the market,” said Urbanation president Shaun Hildebrand. “Demand for new condominiums is exceptionally strong.”

Greenland and Aoyuan did not respond to a question on whether they have the capital to finish their projects.

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