China’s Latest Credit Scare Sends Wanda Dollar Debt Tumbling

(Bloomberg) — Dalian Wanda Group Co. has become the latest source of angst in China’s credit market, with dollar bonds of billionaire Wang Jianlin’s conglomerate sinking to distressed levels just months after they were issued.

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This week’s plunge occurred as investors brace for a potential surge in cash outlays by the group. Wanda and its units could face the equivalent of $1.9 billion in principal and interest payments on loans and public bonds, including put options, the rest of this year, according to data compiled by Bloomberg.

The declines accelerated Friday for two dollar bonds sold by a Wanda unit earlier this year, each falling a record 12 cents according to Bloomberg-compiled prices. The notes have slumped nearly 30% this week.

Concerns about Wanda’s debt have increased amid uncertainty about a potential listing of a mall unit, which the group first filed for in 2021. The clock is ticking. The third application for the deal lapses next week. In March, China’s securities regulator asked how delays might affect debt-repayment abilities. A Wanda unit may have to repurchase about 30 billion yuan ($4.4 billion) of equity from pre-IPO investors if a listing doesn’t happen by the end of 2023.

A Debtwire report this week said three offshore term loans totaling $1.3 billion give lenders the option to require early repayment if the shopping-mall unit doesn’t list by May.

“Liquidity is still tight for Wanda despite the debt raised earlier this year,” according to Eddie Chia, portfolio manager at China Life Franklin Asset Management Co. Time isn’t on the IPO’s side and further delays could put pressure on Wanda to negotiate over its debt, he added.

Dalian Wanda didn’t reply to a request for comment.

Yields on the two notes sold this year Wanda Properties Global Co. have surged to over 35%, Bloomberg-compiled data show, versus 12.375% when they were issued. At such yields in the secondary market, it’s difficult for borrowers to raise fresh cash — an environment that fueled China’s property-sector debt crisis and record defaults.

Dalian Wanda has been viewed as among China’s few high-quality names in the junk-bond market because its property focus is commercial, not residences. Its older dollar bonds remained above 70 cents during most of last year’s property-sector turmoil. The company, among the country’s biggest mall owners and operators, has been paring leverage and selling assets following a debt-fueled buying binge last decade that included US theater chain AMC Entertainment Holdings Inc.

The two Wanda notes issued this year are among the worst-performing securities this week in a Bloomberg index of China high-yield dollar bonds, a period that’s seen broader declines in property firms’ debt. The weakness is a fresh reminder that investor sentiment remains fragile despite signs of recovery in the housing market.

Investing in Wanda debt at the moment “is an event-driven trade” based on whether Zhuhai Wanda goes public, said Fiona Kwok, an Asia fixed-income portfolio manager at First Sentier Investors HK Ltd. Struggles in China’s property sector prompted prior delays for the IPO, Bloomberg previously reported.

Bloomberg Intelligence credit analyst Andrew Chan predicts lenders will push out the IPO completion deadline. “It does no good for the banks to call the loans,” he said.

–With assistance from Dorothy Ma, Chester Yung and Emma Dong.

(Updates market levels in the third and eighth paragraphs.)