Fitch downgrades Wanda Commercial on offshore funding concerns
Wanda Commercial’s total debt was US$35.69 billion as of end-June, according to ratings agency S&P
Fitch Ratings has downgraded Dalian Wanda Commercial Property two notches, blaming its inability to access offshore funding channels.
Fitch also maintained its ‘Rating Watch Negative’ to reflect the continued lack of definitive funding channels to boost Wanda’s offshore liquidity.
Some of the unit’s onshore local-currency notes also have various creditor protection measures that could be triggered by non-payment events, said Fitch.
The rating on the commercial property unit has been lowered to BB+ from BBB, and the downgrade comes after Wanda Commercial failed to issue offshore senior notes by the end of 2017, despite it gaining approval for the US$1.5 billion issuance quota from the National Development and Reform Commission.
Wanda Commercial’s total debt was 279 billion yuan (US$35.69 billion) as of end-June, according to ratings agency S&P.
Fitch said the company’s offshore liquidity risk is adding up, as it needs to apply to extend the quota.
“The two-notch downgrade reflects Wanda Commercial’s inability to access offshore funding channels to boost its offshore liquidity,” said Fitch, adding it has heightened its offshore liquidity risk beyond levels commensurate with an investment-grade credit profile.
Recognising that its strong onshore business profile, especially rental income, has supported the company’s rating, Fitch added the risk is nevertheless exacerbated by the absence of approval from the State Administration of Foreign Exchange to transfer onshore funds offshore.
The Fitch move comes a day after Wanda Network Technology Group, a unit of the property conglomerate, said it is slashing its workforce. Wanda Network will shrink its workforce to 300 jobs from 6,000, according to a December 29 report by The Paper, a Chinese news website.
Wanda’s founder Wang Jianlin agreed to buy a majority stake in the Hong Kong-listed Wanda Hotel Development Co for HK$3.67 billion (US$469 million) on December 4, from Wanda Commercial, a move believed to provide long-wanted liquidity to pay down its offshore loans.
Fitch said this also signified that Wanda Commercial is still under significant pressure to correct its previous aggressive expansion overseas, and it is likely to abandon its overseas expansion plans in the near future.
In September, 2017, S&P Global lowered Wanda Commercial to BB from BBB-, citing its weakened market position in its property development segment after it agreed to sell the bulk of its theme parks and hotel assets in July.
Another credit ratings agency Moody’s Investors Service also downgraded Wanda Commercial in the same month with a negative outlook.