Wanda warns of US$200 Million shortfall on bond, surprising market
ONE of China’s most closely watched property firms that has stayed afloat even as peers succumb to a debt crisis flashed warning signs ahead of a US dollar-bond payment, fuelling fresh investor concerns just as the economy cools.
A key unit of Chinese conglomerate Dalian Wanda Group told some creditors on Monday (Jul 17) it was still raising funds for a US$400 million note that matures Jul 23, according to people involved in the private conversations who asked not to be identified.
The unit, Dalian Wanda Commercial Management Group, said that there was a funding gap of at least US$200 million for repayment of the bond, the people said, adding that the firm was weighing an alternative plan that it did not provide details of. There is no grace period to pay the principal, according to bond documents.
Fresh data released on Monday showed China’s economy lost momentum in the second quarter, adding to global risks as Beijing hints that any stimulus measures will be targeted, rather than broad. Property investment declines steepened in June, underlining the sector’s worsening downturn as policymakers pledge more support.
The Wanda unit’s bond that matures Jul 23 plunged 21 US cents to 72 cents, according to prices compiled by Bloomberg, on pace for a record decline. Other units’ notes slid at least 10 US cents to fall deeper into distressed territory. Weakness spread on Monday to fellow high-yield property firms like Country Garden Holdings and Road King Infrastructure.
One of the few survivors in China’s offshore high-yield market, Wanda has so far avoided defaulting on public US dollar debt. But there has been a surge in delinquencies by Chinese issuers since the start of 2022, especially among property firms in the wake of that sector’s liquidity crunch.
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Worries about Wanda’s debt have circled the firm for months, amid the delayed listing of a mall unit in Hong Kong. If that firm does not go public this year, the conglomerate may have to repay that unit’s other investors about 30 billion yuan (S$5.5 billion).
Moody’s Investors Service and Fitch Ratings both downgraded Wanda Commercial deeper into junk territory earlier this month, citing weakened funding access for the conglomerate. Several creditors said they were told last week by Wanda Commercial that it was largely prepared to pay off the July note.
Founded in 1988 by billionaire Wang Jianlin, Wanda over the years amassed assets ranging from the Ironman triathlon business, to at one time being the world’s biggest cinema operator through its purchase US-based AMC Entertainment Holdings. Wang once had hopes of turning his group into China’s answer to Walt Disney.
But Wanda changed course after the country’s stock market bubble burst in 2015, and the government moved to tamp down on the global ambitions of some Chinese firms. It has since sold hotel and theme park assets, among other holdings. But Wanda still manages more than 400 malls. BLOOMBERG
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