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Wanda Turns From Loser to Winner in China's Bond Market

Updated on
  • Wanda best-performing property firm in debt market this year
  • Citic Securities says asset sales improve market confidence

Dalian Wanda Group Co.’s asset sales have turned its bonds from losers to winners in China’s local debt market, by boosting confidence the conglomerate will be able to service its debt.

The group’s main property unit is the best performer among real estate companies, with all its nine onshore notes in the Bloomberg Barclays China corporate debt index returning more than 2 percent since Dec. 31. Last year, the securities were the worst performers, with losses of as much as 9 percent.

“The market is betting that Wanda’s financial strength will improve with the sales of assets,” said Lyu Pin, a bond analyst at Citic Securities Co. in Beijing. “If Wanda can continue to implement its asset-light strategy and get listed in the stock market, its credit fundamentals will improve further.”

Billionaire founder Wang Jianlin has stepped up disposals of assets after concerns about the conglomerate’s default risks rose. Wanda is selling off property assets in Australia and the U.K., alleviating near-term liquidity pressure. A consortium led by Tencent Holdings Ltd. last month agreed to buy a stake in Wanda Commercial, easing pressure on the unit to complete a listing by September. Moody’s Investors Service and S&P Global Ratings said Wanda Commercial’s recent overseas asset sales and equity transfer are positive.

Wanda’s Chinese units haven’t issued any bonds since people familiar with the matter said in June that the Chinese banking regulator increased scrutiny on overseas loans to the group and several other large, private-sector companies.

There’s uncertainty whether the flagship property unit, Dalian Wanda Commercial Properties Co., will be able to repay $1.5 billion in offshore syndicated loans, which must be fully repaid by May, and $600 million of bonds due in November, Fitch Ratings said on Jan. 31 after the announcements of asset sales and share transactions.

Wanda Commercial declined to comment.

In the onshore market, Wanda Group’s units must repay 4.5 billion yuan ($714 million) of bonds this year and investors may also exercise put options to sell 10 billion yuan of bonds back.

Wanda Commercial’s best-performing bond this year is a note due April 2021 that has returned 3.3 percent.

“The recent equity funding into Wanda is credit positive, as it demonstrates good access to financing,” said Chuanyi Zhou, a credit analyst at Lucror Analytics. “That said, the company’s business strategy is not yet clear. The long-term development of Wanda is vague.”

— With assistance by Judy Chen, and Jing Yang De Morel

(Adds amount of onshore bonds due in the eighth paragraph.)
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