Unit of Chinese developer Dalian Wanda seeks to delay payment on US$600 million bond due in January

Wanda Properties International is looking to extend bond’s maturity date to December 2024
Group is trying to ‘proactively manage and address the near-term liquidity pressure’, bond guarantor Dalian Wanda Commercial Management Group says

Bonds

Jiaxing Li

Published: 7:30pm, 21 Nov 2023

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A key unit of Dalian Wanda Group, one of China’s biggest commercial property developers, is seeking to delay payment on a dollar bond maturing next year, as the country’s property sector woes spread to key players.

Wanda Properties International is looking to extend the maturity date of a US$600 million bond due in January by almost a year to December 2024, according to a filing with the Hong Kong stock exchange on Tuesday. It will repay 10 per cent of the outstanding principal in January, 20 per cent in May, 30 per cent in September and the rest when due, according to the terms in its consent solicitation document.

“The group seeks to proactively manage and address the near-term liquidity pressure that will result from the combined effect of the maturity of the bonds, the economic slowdown and the heightened market volatility during the past few years,” Dalian Wanda Commercial Management Group, the guarantor of the bond, said in the filing. These events have affected the group’s business and its operations, it added.

The bond is Wanda’s closest maturing offshore dollar note. The company has two other notes due in 2025 and 2026 totalling US$800 million, according to Bloomberg data.

The conglomerate has been wrestling with a cash crunch this year as China’s property crisis continues to spiral. Earlier this year, it narrowly avoided default by selling stakes in a wholly owned subsidiary and raising 2.26 billion yuan (US$314.4 million).

China’s property sector has witnessed more than US$100 billion worth of bond defaults since the introduction of Beijing’s “three red lines” policy three years ago. The policy has crippled home builders’ finances and their ability to raise funds. The default rate for high-yield property bonds has reached 42.2 per cent this year, only slightly below a record 46.8 per cent reported in 2022, according to Goldman Sachs.

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Country Garden Holdings, once considered a healthy private developer, plunged into distress this summer and missed a US$60 million coupon payment in October. China Evergrande Group, meanwhile, awaits a final hearing next month as its insolvency process continues.

Meanwhile, policymakers in Beijing have been rolling out new stimulus measures in recent weeks to prop up the stricken property sector. These measures include mortgage rate cuts, down-payment reductions and a push for urban infrastructure upgrades. But there has been little reaction in the markets, and the sector is yet to show any signs of a reversal.

But the outlook remains gloomy for the sector. The default rate for Chinese high-yield property dollar bonds will remain elevated next year, as property sales continue their slide, putting more strain on already stressed liquidity conditions, Goldman said.

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