Fitch downgrades Wanda Commercial Property to junk on offshore funding concerns

[HONG KONG] Fitch Ratings on Wednesday downgraded Dalian Wanda Commercial Property by two notches to a junk rating, citing the company's inability to access offshore funding channels to boost its liquidity in a timely manner.

The rating agency downgraded Wanda Commercial to 'BB+' from investment grade 'BBB', the second downgrade since 2016. Fitch also maintained its 'Rating Watch Negative' to reflect the continued lack of definitive funding channels to boost Wanda's offshore liquidity.

Chinese conglomerate Dalian Wanda Group, parent of Wanda Commercial and owned by one of China's richest men, Wang Jianlin, has invested heavily in entertainment and sports assets over the last few years. This has drawn the attention of Chinese regulators looking to stem perceived risky spending overseas.

"Wanda's liquidity position may come under substantial pressure if its offshore syndicated loan lenders demand for early repayment and Wanda fails to meet these demands promptly; or it fails to raise sufficient offshore liquidity to repay the US$510 million second tranche of its offshore syndicated loan due in March 2018," Fitch said in a statement.

Wanda failed to issue offshore senior notes by the end of 2017 despite gaining the National Development and Reform Commission's (NDRC) approval for US$1.5 billion in issuance quota, and it's still uncertain when State Administration of Foreign Exchange (SAFE) will approve Wanda to remit onshore fund offshore, it added.

"This could trigger the cross-default clauses for the US$1.2 billion in senior notes, and add to repayment pressure." Rating agencies S&P and Moody's last year downgraded Wanda Commercial to below investment grade.

Dalian Wanda Group last month said its 2017 revenues surpassed 200 billion yuan (S$40.97 billion) and it had an equal amount in cash, responding to a local online media report that questioned the group's financial health.

REUTERS