The Chinese parent company of Pacific Park co-developer Greenland USA is at risk of defaulting on its debt payments.
Greenland Holdings, among the largest developers in China, has asked for an extension to repay its $488 million debt held by bondholders coming due at the end of June. On Monday, S&P Global Ratings downgraded Greenland to CCC, two levels below the junk status threshold.
“We believe the company is vulnerable to nonpayment,” S&P said in its report.
The report cited a number of reasons for the downgrade, including the difficulty of selling assets in China because of lockdowns in Shanghai, along with Greenland’s limited cash on hand to meet debt payments, totaling $2.4 billion over the next year.
Greenland’s bond price recently dipped from 92 cents on the dollar to a low of 41 cents as a result of the extension request, according to Bloomberg. If the loan extension is approved, S&P said that it would likely lower Greenland’s credit rating to a “selective default.”
The implications for Greenland’s U.S. subsidiary and its holdings are unclear.
Along with Forest City, the company’s U.S. affiliate is co-developing Pacific Park, originally called Atlantic Yards, at the edge of Downtown Brooklyn. Pacific Park spans several blocks south of Atlantic Avenue and west of Vanderbilt Avenue by Barclays Center.
Greenland bought a 70 percent stake in the project from Forest City Ratner in 2014. Two years later, it raised its stake to 95 percent. Initially slowed by community lawsuits and then by the Great Recession, the megadevelopment remains incomplete.
“Greenland Forest City Partners is fully committed to continuing to fulfill our obligations at Pacific Park Brooklyn, with incredible progress underway and major milestones upcoming,” said a spokesperson for Greenland Forest City Partners. “This summer we will commence work on the platform that will support the next phase of the project.”
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Greenland recently sold two apartment buildings within the complex — 38 6th Avenue and 535 Carlton Avenue — to Avanath Capital Management for $315 million.
Greenland’s U.S. affiliate is also the developer of the Metropolis, a 3.3 million-square-foot project in downtown Los Angeles. Sitting three blocks south of Los Angeles’ Crypto.com arena (the former Staples Center), the project includes a Hotel Indigo and three residential towers.
Greenland is one of many Chinese real estate firms struggling to make debt payments after the government rolled out a policy to limit excessive borrowing. Some of the nation’s developers, such as Evergrande, which built its empire on leverage, have defaulted on their debt. But Greenland was thought to be immune from some of these pressures because it had the backing of the Shanghai government. Its recent troubles, however, suggest otherwise.