Concern mounts over China's Wanda Commercial as rating agencies sound default warnings
MOODY’S and S&P Global on Thursday (Jul 20) sent stark warnings about China’s biggest commercial real estate firm, Dalian Wanda Group.
The warnings add to concerns that the country could be about to suffer its biggest property developer default since Evergrande.
Moody’s slashed Dalian Wanda Commercial Management (DWCM) and Wanda Commercial Properties (Hong Kong) Co’s ratings by six full notches, saying there is now high uncertainty over whether DWCM would be able to make a US$400 million debt payment that is due in just three days’ time.
S&P also said “non-payment risk” had risen after reports the group had been scrabbling to find the cash needed by Sunday and for another US$22 million interest payment that it was supposed to pay on Thursday, but has a 10-day grace-period clause.
S&P said asset sales at parent Dalian Wanda were so far insufficient to support Wanda Commercial.
Dalian Wanda Group declined to comment.
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“Based on our understanding, the company currently only has about US$200 million in accessible offshore cash,” S&P said of Wanda Commercial, with further funds already pledged against onshore borrowing.
“Given the tight timeline”, it said “execution risk” was high and lowered its rating on the company’s debts to “speculative grade” CCC.
The companies’ bonds slumped dramatically this week as concerns mounted, although Thursday’s moves were highly volatile.
A Bloomberg report that some of DWCM’s creditors had been told the firm expects to complete an asset disposal as early as this week to fund the US$400 million bond payment saw the key bond due on Sunday leap almost 30 US cents at one point, traders said.
Wanda Commercial’s 2025 and 2026 maturing bonds rose over five US cents, Tradeweb data showed, although that still left both bonds at less than a third of their original face value.
Other high-profile but debt-strained China property names also suffered sizeable sell-offs this week, as more negative news emerged around the sector that contributed about 25 per cent of China’s gross domestic product before it was battered by a government crackdown and collapse in home sales over the last couple of years.
Since the poster child of the crisis China, Evergrande, defaulted in 2020, there has been a rash of other defaults that have left swathes of uncompleted housing projects in their wake.
June data on Monday showed the largest monthly slump in property sales this year and with fresh defaults – even at state-backed builders – more pressure is building on the sector.
The trustee for state-backed developer Greenland Holdings’ US dollar bond said last week the developer defaulted on the notes worth US$432 million, while Sino-Ocean Group proposed this week to extend the repayment for a two billion yuan (S$369.4 million) onshore bond due Aug 2.
Evergrande, the world’s most indebted property developer, on Monday posted a combined loss of US$81 billion in 2021 and 2022, and a rise in total liabilities in its long overdue results. REUTERS
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