Chinese property firm Dalian Wanda to tap offshore bond markets for second time this year with US$300 million offering

The notes have been oversubscribed by more than one-and-a-half times as of 7pm local time on Monday, sources say
Lead manager Credit Suisse says China’s property sector is slowly reviving and is optimistic more deals wiill ensue

Bonds

Pearl Liu

Published: 9:11pm, 6 Feb 2023

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Dalian Wanda Commercial Management is poised to issue US$300 million of high-yielding bonds in the coming days, its second dollar-denominated note offering in less than a month, according to people familiar with the matter.

The company, Chinese conglomerate Dalian Wanda Group’s commercial property management arm, was marketing the three-year notes with an initial price guidance of 12.5 per cent earlier on Monday, the people said. It was oversubscribed by more than one-and-a-half times by 7pm Hong Kong time.

The company raised US$400 million from the sale of two-year notes on January 13 to yield 12.375 per cent, which were oversubscribed by two-and-a-half times, according to sources. The new offering is likely to offer the same yield, they added.

“We are glad to see the sector reviving, and after this second deal, hopefully we will see more,” said Terence Chia, head of debt capital markets syndicate for Asia-Pacific at Credit Suisse, which led the deal. “Investors were hurt by the defaults and the turmoil in the sector, and [are] glad to see the [property] market is slowly recovering. But still they will be very selective and only choose quality names.”

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

The bank has a couple of deals in the pipeline and hopes they will be completed “over the next month or so”, Chia said.

Dalian Wanda Commercial Management, which owns and operates hundreds of Wanda Plazas across the country, declined to comment when contacted by the Post.

Wanda’s latest offering will mark the second US dollar bond issuance by a Chinese developer since the default crisis of late 2021, which led to the panic selling of Chinese high-yield dollar bonds by investors. The offshore bond market has largely been frozen for Chinese junk-rated property companies since Seazen last sold US$100 million of notes in June last year.

11:05

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Dalian Wanda Commercial Management’s moves in the offshore market come as Beijing tries to shore up its housing market, a key pillar of China’s economic growth. Beijing has rolled out a series of rescue measures since last November to support the liquidity position of property developers, such as support for bank loans, new equity placements and bond issuances.

Last month, state-run news agency Xinhua reported that China’s top financial regulators had drafted a comprehensive package of 21 major tasks aimed at alleviating the liquidity crunch for what Beijing sees as “good-quality developers”.

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Moreover, 30 city governments lowered mortgage rates for first-time buyers the same month, in response to a pledge by Beijing to help people get onto the property ladder. This move is also expected to boost developers across China.

Offshore investors, however, remain cautious about China’s property sector. About 50 developers defaulted on an estimated US$100 billion worth of offshore bonds over the past two years, according to a JPMorgan report in December.

Where are the white knights in China’s US$1.7 trillion property sector?

“The offshore bond market is still not open for most [Chinese] private developers,” said Joyce Bing, fixed-income investment manager for Asia at global investment company Abrdn.

“We expect developers with high-quality mixed ownership, and select private developers that have demonstrated access to the new supportive government policies, will continue to demonstrate improving performance. Additionally, developers with more diversified operations away from pure residential real estate, are likely to fare better amid the policy easing.”

Fitch Ratings on Monday accorded Wanda’s new notes the same “BB” grade as last month’s issue, which indicates the risk of speculation. Once again, it said: “[Dalian Wanda Commercial Management] has granted a keepwell deed and a deed of equity interest purchase undertaking to ensure the issuer has sufficient assets and liquidity to meet its note obligations.”

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