Wanda to Raise $314 Million From Asset Sale as Bond Matures

Published 24 July 2023, 03:20:49.764 GMT

(Bloomberg) -- Dalian Wanda Group Co. is selling a stake in one of its entertainment units for 2.26 billion yuan ($314 million), raising odds the Chinese conglomerate will avert default on a maturing dollar bond.

Concern over a Wanda unit’s ability to repay a $400 million note by Monday has rocked China’s high-yield market in recent weeks, driving wild price swings in the conglomerate’s dollar bonds and those of some peers. Wanda had until recently been one of the few property-related Chinese issuers to avoid default fears amid a multiyear debt crisis that has touched nearly every corner of the industry.

The firm agreed to sell a 49% stake in a unit of Beijing Wanda Cultural Industry Group Co. to China Ruyi Holdings Ltd., according to a Hong Kong exchange filing from the latter on Sunday.

Bloomberg reported last week that a Wanda unit told some creditors it was finalizing an asset disposal to help pay down
the dollar bond. People involved in the conversations said the asset wasn’t specified. The note closed last week at 87 cents after falling to as low as 53 cents.

“The stake transfer is positive for Wanda as there could be a last-minute repayment ability for its $400 million bond,” said
Bloomberg Intelligence credit analyst Andrew Chan. But he added “there might not necessarily be positive implications for the broader property market” given Wanda is a mall owner, rather than a developer.

China’s builder-dominated market of high-yield dollar bonds was down about 1 cents on average Monday morning, credit traders said. The junk market lost 3.3% last week, one of the worst performances of 2023, according to a Bloomberg index.

The conglomerate’s key unit, Dalian Wanda Commercial Management Group Co., was lowered from single-B territory last
week by the three major international ratings firms. Fitch Rating’s downgrade Friday to C occurred a day after interest on another Wanda dollar bond wasn’t paid. There’s a 10-day grace period before an event of default can be triggered. Wanda Commercial responded to the recent downgrades by saying Friday that its operations were still stable and profitability outlook was good.

“Investors remain worried about the credit crunch facing private real estate companies, even if Wanda Commercial repays the bond and make good on its missed coupon,” said Leonard Law, senior credit analyst with Lucror Analytics Pte. “This is as banks are cautious toward lending to high-risk companies while landlords such as Wanda Commercial are unable to sell property assets given a lack of buyers.”

China Ruyi’s shares fell 1.5% on the back of the Wanda deal. Monday morning’s trading was volatile, with the stock both rising and falling nearly 10% at different points of the session.

By Wei Zhou