Wanda faces US$700 million of bond deadlines as China woes flare

[BEIJING] China’s worsening property debt crisis is ratcheting up scrutiny of the country’s major real estate firms that have so far avoided default, as looming offshore bond maturities draw closer.  

The commercial real estate unit of Dalian Wanda Group, a conglomerate founded by billionaire Wang Jianlin, is a case in point. Dalian Wanda Commercial Management Group’s dollar notes due on Feb 13 next year have dropped below 92 cents from as high as 97 a month ago. Its bonds due Jan 12 fell more than one cent in the past week to about 97 cents, the lowest in six months. 

The firm, which previously delayed payments on dollar securities, has been working with advisers to sound out investor interest for potential options to deal with the US$700 million owed across the two notes, people familiar with the matter said. 

It’s considering an offer to buy back some of the US$400 million 11 per cent note due in February and issue new securities to refinance the rest, according to the people, who asked not to be identified. Funding to pay the US$300 million outstanding on the January bond has been identified, they added. 

China’s developer bonds and shares have been rattled in recent days after a surprise bond extension proposal by China Vanke, formerly the country’s largest homebuilder by sales. Analysts have widely anticipated the event to complicate efforts by other developers to secure new funding, though Wanda may still have time to weather the fallout. 

Wanda, one of the largest commercial property companies in China, was once regarded as a rare high-quality borrower in the junk-bond market, thanks to its focus on commercial real estate management rather than the battered residential sector. But that sector has also started to suffer more strains. As an unprecedented property crisis enters its fifth year, investment managers including BlackRock and Carlyle Group have offloaded commercial buildings at discounts, causing creditors to lose money as well.

Wanda hasn’t decided on the timing of the deal and other details including size, tenor and deal structure are still under discussion, the people added. 

A representative for Wanda declined to comment.

In addition to Wanda, several other real estate firms such as China Jinmao Holdings Group and Beijing Capital Development Holding Group are also mulling raising funds in the offshore bond market, other people familiar with the matter said in November. 

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That’s all happening just as the Vanke shock prompted many traders to dump Chinese property notes. Vanke’s yuan and dollar notes have tumbled to record lows in the past week. Dollar notes from its peers such as Seazen Group are also coming under mounting selloff pressure in secondary trading. 

Potential investors in Wanda will also have its previous steps to manage debt in mind.

In 2023, Wanda proposed repaying a dollar bond in instalments and later managed to push back the maturity of a portion of its original US$400 million 11 per cent notes by one year to January 2026. 

Last year, the billionaire founder agreed to cede control of its shopping mall management arm in a US$8.5 billion deal to a consortium led by private equity firm PAG. These moves have so far helped Wanda stave off the risk of default or worsening stress. BLOOMBERG