One of China’s most closely watched property firms warned of a funding shortfall just days before a key dollar-bond payment, fueling fresh investor concerns about credit risk in the world’s second-largest economy as growth sputters.
(Bloomberg) — One of China’s most closely watched property firms warned of a funding shortfall just days before a key dollar-bond payment, fueling fresh investor concerns about credit risk in the world’s second-largest economy as growth sputters.
A key unit of Dalian Wanda Group Co. — among the few Chinese real estate conglomerates to stay afloat even as peers succumbed to an industrywide debt crisis in recent years — told some creditors Monday it’s still raising funds for a $400 million note that matures July 23, according to people involved in the private conversations who asked not to be identified.
The unit, Dalian Wanda Commercial Management Group Co., said it faces a funding gap of at least $200 million for repayment of the bond, the people said, adding the firm is weighing an alternative plan that it didn’t provide details of. There’s no grace period to pay the principal, according to bond documents.
Wanda Faces Key Payment Test After Halting Bond Issuance Plan
Fresh data released Monday showed China’s economy lost momentum in the second quarter, adding to global risks as Beijing hints that any stimulus measures will be targeted rather than broad. Property-investment declines steepened in June, underlining the sector’s worsening downturn as policymakers pledge more support.
The Wanda unit’s bond that matures July 23 plunged 21 cents to 72 cents, according to prices compiled by Bloomberg, on pace for a record decline. Other units’ notes slid at least 10 cents to fall deeper into distressed territory. Weakness spread Monday to fellow high-yield property firms like Country Garden Holdings Co. and Road King Infrastructure Ltd.
One of the few survivors in China’s offshore high-yield market, Wanda has so far avoided defaulting on public dollar debt. But there’s been a surge in delinquencies by Chinese issuers since the start of 2022, especially among property firms in the wake of that sector’s liquidity crunch.
Worries about Wanda’s debt have circled the firm for months amid the delayed listing of a mall unit in Hong Kong. If that firm doesn’t go public this year, the conglomerate may have to repay that unit’s other investors about 30 billion yuan ($4.2 billion).
Moody’s Investors Service and Fitch Ratings both downgraded Wanda Commercial deeper into junk territory earlier this month, citing weakened funding access for the conglomerate. Several creditors said they were told last week by Wanda Commercial that it was largely prepared to pay off the July note.
Founded in 1988 by billionaire Wang Jianlin, Wanda over the years amassed assets ranging from the Ironman triathlon business to at one time being the world’s biggest cinema operator through its purchase US-based AMC Entertainment Holdings Inc. Wang once had hopes of turning his group into China’s answer to Walt Disney Co.
But Wanda changed course after the country’s stock-market bubble burst in 2015 and the government moved to tamp down on the global ambitions of some Chinese firms. It has since sold hotel and theme-park assets, among other holdings. Wanda still manages more than 400 malls.
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