LONDON (Reuters) – There was more bad news for China’s real estate sector on Monday as reports of more financing troubles and a credit rating cut to the services arm of China’s largest commercial property firm, Dalian Wanda Group (DWG), triggered a record slump in the unit’s bonds.
S&P Global cut Dalian Wanda Commercial Management Group to “B+” from “BB-” and put it on “CreditWatch negative,” rating agency parlance for another downgrade warning.
Bloomberg also reported that the firm had told some creditors that it was still raising money for a $400 million bond payment due later this month.
Wanda Commercial’s 2025 and 2026 maturing bonds slumped by 11.6 cents and 11.9 cents, respectively. Both were record drops according to Tradeweb data and left them at 34 cents on the dollar and 32 cents on the dollar – a third of their face value.
Many of China’s property developers have been battered over the last couple of years as a share fall in apartment sales and a rash of debt defaults have savaged a sector that previously contributed around a quarter of the country’s gross domestic product.
S&P had first warned of Monday’s move in late April after repeated problems regarding a planned Hong Kong listing of a subsidiary, Zhuhai Wanda Commercial Management Group, had raised concerns about Wanda Commercial’s liquidity buffers.
“We downgraded Wanda Commercial due to greater uncertainties over Zhuhai Wanda’s initial public offering (IPO),” S&P said in its explanation on Monday.
It added it would decide on whether to cut the rating again, “once we have details to assess the likelihood of the listing of Zhuhai Wanda and Wanda Commercial’s other back-up plans. We will also assess the credit profiles, especially liquidity position, of Wanda Commercial and DWG.”
The Zhuhai Wanda listing requires the approval of China’s securities regulator and it is not clear if, or when, that might be forthcoming.
Disputes over a development project under Wanda Properties Group have also led to substantial freezes of DWG’s shares in Wanda Commercial and the subsidiaries of Wanda Properties, although some of have been unfrozen after negotiations.
Fitch and Moody’s both downgraded Wanda Commercial in May although Fitch’s BB- rating and Moody’s Ba2 rating are now respectively one and two notches above S&P’s B+ score.
(Reporting by Marc Jones in London; Editing by Matthew Lewis)