Dalian Wanda bond prices rise after Chinese conglomerate says creditors have not sought early repayment of loans worth US$1.3 billion

Conglomerate will benefit from the release of pent-up demand following China’s reopening, Nomura says
Wanda only high-yield China property issuer in the offshore debt market so far this year

Banking & finance

Iris Ouyangin Shenzhen

Published: 8:30pm, 29 May 2023

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Chinese conglomerate Dalian Wanda’s dollar bonds jumped to a new high on Monday after it said creditors of loans worth US$1.3 billion had not demanded early repayments following the failed initial public offering (IPO) of unit Zhuhai Wanda Commercial Management Group.

Its US$400 million 6.875 per cent dollar bond due on July 23 this year was indicated at 87.271 cents on a dollar on Monday, its highest level in two weeks, rising from 77.875 cents on a dollar on Friday, according to Bloomberg data.

The IPO of Zhuhai Wanda, which is 66.96 per cent owned by Dalian Wanda Commercial Management (DWCM), Dalian Wanda’s property management arm, lapsed for a third time at the end of April after it failed to submit relevant listing documents within six months of a mandatory deadline. If Zhuhai Wanda failed to list by May 8, banks with more than 66.67 per cent of Dalian Wanda loans could demand repayments, DWCM said in a statement on Friday, adding that none had done so as of date.

“Overall, we are comfortable with DWCM’s cash-cow business itself and view its business [as benefiting] from pent up demand after [China’s] reopening,” Nomura analyst Iris Chen said in a note last week.

Dalian Wanda unit issues US dollar bond to raise US$400 million

Dalian Wanda’s bonds and stocks have been hit by market jitters about its financial health in recent weeks, as well as speculation that an unspecified DWCM subsidiary intended to extend all of its onshore trust loans. Early redemption calls would have put further pressure on tight cash flow at the conglomerate, which was once viewed as one of the few healthy Chinese developers in a broader sector facing turmoil.

The conglomerate has been the only high-yield China property issuer in the offshore debt market so far this year. It was deemed a safer player in China’s real estate market amid frequent bond defaults and restructurings due to its asset-light business model.

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As it is, Zhuhai Wanda’s failed IPO intensified concerns about the company, as it will have to repurchase 30 billion yuan (US$4.4 billion) of equity from pre-IPO investors if it is unable to successfully list by the end of 2023. Fitch and S&P Global Ratings placed some Wanda entities on “negative watch lists” in April on uncertainties around the Zhuhai Wanda IPO.

Dalian Wanda, controlled by billionaire founder Wang Jianlin, is one of the largest commercial property development firm in China.

Wanda Properties International’s US$600 million 7.25 per cent bond due January 29 next year and Wanda Properties Global’s US$400 million 11 per cent note due January 20, 2025 rose by more than 4 cents on Monday, according to Bloomberg data. Both firms are indirectly owned subsidiaries of Dalian Wanda.

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Ratings agency Moody’s Investors Service downgraded DWCM from “Ba1” to “Ba3” on May 5, and downgraded a few other related entities and their notes. “The downgrade reflects our concerns over DWCM’s increased liquidity and governance risks in view of its reduced liquidity buffer and weakened funding access, as well as increased related-party transactions with its largest shareholder, Dalian Wanda Group,” Moody’s analyst Alfred Hui said.

DWCM’s short-term debt increased 50 per cent year on year to 30 billion yuan, even excluding the close to 44 billion yuan in possible early repayment obligations to pre-IPO investors, while its unrestricted cash decreased by 53 per cent to close to 20 billion yuan, according to Nomura.

On Friday, Dalian Wanda also dismissed other market concerns, including speculation that it had faked some financials, its possible acquisition by state-owned conglomerate China Resources and the sales of 20 shopping malls across several regions of China.

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