One of China’s most closely watched property firms, Dalian Wanda Group, rallied by a record Thursday in credit markets as a key unit told some creditors it’s finalizing an asset disposal to help pay down a dollar bond due in just days.
(Bloomberg) — One of China’s most closely watched property firms, Dalian Wanda Group, rallied by a record Thursday in credit markets as a key unit told some creditors it’s finalizing an asset disposal to help pay down a dollar bond due in just days.
Representatives of Dalian Wanda Commercial Management Group Co. told the creditors that the firm expects to complete the asset disposal as early as this week and plans to use the proceeds to repay its $400 million bond due July 23, people involved in the private conversations said. The representatives wouldn’t specify what the asset is, according to the people, who asked not to be identified discussing private matters.
Wanda is among the few Chinese real estate conglomerates to stay afloat even as peers succumbed to an industrywide debt crisis in recent years. But concerns have swirled in recent months that it would struggle to meet upcoming debt payments, after a Wanda Commercial unit’s third application for a Hong Kong stock listing lapsed. If it doesn’t go public this year, the conglomerate may have to repay the mall unit’s other investors about 30 billion yuan ($4.2 billion).
Wanda’s bonds swung by records this week, which spilled over into the broader market for Chinese junk notes. The moves started after people familiar with the matter said on Monday that Wanda Commercial had told creditors it had a shortfall of at least $200 million for repayment of the note. That news dragged the July note as low as 53 cents by Wednesday. But on Thursday, it rallied a record 29 cents to about 90 cents. An onshore Wanda note rose 32%, its most ever, and the gains triggered two trading halts.
The representatives of Wanda Commercial told the creditors that the chances of the firm repaying the dollar bond had become relatively high, the people said. That marked a shift from Wednesday, when the representatives had told them there was relatively high uncertainty. There is no grace period to pay the principal, according to bond documents.
Wanda Group didn’t comment when reached by Bloomberg News to ask about the matter.
China’s developer-dominated high-yield market was generally mixed Thursday following one of its worst three-day stretches this year. Bond investors appeared largely unmoved by authorities considering the easing of home buying restrictions in the nation’s biggest cities. New-home sales weakened anew in June as existing policies have proved unable thus far to fuel a sustained recovery.
“If the government really dials back the tough stance against property speculation, I think the market would also be concerned of the consistency of policy making and whether the top authorities have a comprehensive long-term plan for the property sector,” said CreditSights senior analyst Zerlina Zeng.
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.
S&P Global Ratings on Thursday downgraded Wanda Commercial for the second time this week because of debt-nonpayment risk. Based on its understanding, the ratings firm said Wanda Commercial has only about $200 million in accessible offshore cash.
In addition to the July 23 maturity, there’s a note with $22 million of interest whose initial payment deadline is Thursday.
S&P’s new grade on Wanda Commercial is CCC, and the firm remains on watch for possible further downgrade. Peers Moody’s Investors Service and Fitch Ratings cut their ratings on the mall operator earlier this month.
(Updates with more details throughout)
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