Concern mounts over China's Wanda Commercial as rating firms sound default warnings (updated)

Wanda Hotel Development

20/07/2023 07:40

(Adds detail, background)
    By Tom Westbrook and Marc Jones
       SYDNEY/LONDON/HONG KONG, July 20 (Reuters) - Moody's and
S&P Global sent stark warnings about China's  biggest commercial
real estate firm, Dalian Wanda Group, on Thursday, adding to
concern that the country could be about to suffer its most
high-profile default since Evergrande.
    Moody's slashed Dalian Wanda Commercial Management and Wanda
HK's ratings by six full notches, saying it was now "highly
uncertain" whether DWCM would be able to make a $400 million
debt payment that is due in just three days' time.
    S&P also said "non-payment risk" had risen after reports the
firm had been scrabbling to find the cash needed by Sunday
 CN210065806=  and for a $22 million interest payment that was
supposed to paid on Thursday but has a 10-day grace period
clause. 
    S&P said asset sales at parent Dalian Wanda, which is
chaired by Wang Jianlin, once China's richest man, were so far
insufficient to support Wanda Commercial. 
    Dalian Wanda Group declined to comment.
    "Based on our understanding, the company currently only has
about $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. 
    Moody's cut it to Caa1, which is one notch on the rating
ladder above S&P's score. But it also cut Wanda Commercial
Properties HK to an even lower Caa3.
        "There is high uncertainty over DWCM's ability to
address its debt repayment due in the next 3-6 months, including
its $400 million bond maturity due on 23 July," Moody's said,
adding that the company's ability to mobilise its cash was in
question.
  
        A default by Wanda, which had managed to 
    sell
     new bonds at the beginning of year, including to
international funds such as Blackrock, Fidelity, Pictet and
Invesco, would signal another leg in China's long-running
property crisis.    
  
        Wanda Commercial's bonds have slumped dramatically this
week as concerns about its fate have mounted  XS210065806=1M 
 XS2577258713=TE   XS2586129574=TE , 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 $400 million bond payment saw the key bond
due on Sunday leap almost 40 cents at one point, traders said.
        Wanda Commercial's 2025 and 2026 maturing bonds
 XS2577258713=TE   XS2586129574=TE  rose over 5 cents, Tradeweb
data showed, although that still left both bonds at less than a
third of their original face value.
    
    ECHO OF EVERGRANDE 
    Other high profile but debt-strained China property names
also suffered sizable sell-offs this week as more negative news
has emerged around the sector that contributed around 25% of
China's GDP 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 2021 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'
 600606.SS  dollar bond said last week the developer has
defaulted on the notes worth $432 million, while Sino-Ocean
Group  3377.HK  proposed this week to extend the repayment for a
2 billion yuan onshore bond due Aug 2. 
    Evergrande  3333.HK , the world's most indebted property
developer, on Monday posted a combined loss of $81 billion in
2021 and 2022 and a rise in total liabilities in its long
overdue results.

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China property crash    https://tmsnrt.rs/3rxi1fz
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 (Additional reporting by Clare Jim in Hong Kong
Editing by Sonali Paul, Kim Coghill, Frances Kerry and Sharon
Singleton)
 ((tom.westbrook@tr.com; +65 6973 8284))