Economic review

Ratings snub raises questions about Wanda's financial health

2018-01-11 08:59:00 (Beijing Time)         China Daily

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The liquidity position of Dalian Wanda Commercial Property Co Ltd, the property developer owned by Chinese billionaire Wang Jianlin, has drawn market attention and raised questions about the developer's financial health after its credit ratings were cut to junk.

Global credit ratings agency Fitch Ratings downgraded Wanda Commercial by two notches to BB+, a junk rating, from BBB, citing the company's inability to access offshore funding channels to boost its offshore liquidity in a timely manner.

The move followed the steps of the other two major credit ratings agencies Standard & Poor's and Moody's Investors Service, which downgraded the Chinese developer last September to junk grade.

Fitch Ratings said the developer will see greater liquidity pressure if its offshore lenders demand early payment or it fails to raise sufficient offshore funds to repay its offshore loans due in March this year.

The risk is exacerbated by the absence of approval from the country's foreign exchange regulator to transfer onshore funds offshore, it added.

There had been speculation that Wanda may run into liquidity troubles after its parent Dalian Wanda Group sold most of its hotel and theme-park assets for more than $9 billion last year amid tighter government scrutiny on risky financing and overseas investment.

The Chinese conglomerate has canceled foreign investment plans after its high-profile acquisitions of overseas entertainment and sports assets drew regulatory attention.

People close to the developer told China Daily on Wednesday that the group's fundamentals remain sound and its short-term debt payment pressure is fine although it has a tighter liquidity position.

Market concerns about Wanda's liquidity problems reflected the increasing financing difficulties for Chinese property developers as the government has sought to cool the country's overheated property market, analysts said.

"It has been really difficult for Chinese developers to gain access to bank loans, especially for unlisted developers. If they seek to raise funds by selling bonds, the interest rates are very high," said Eva Lee, a property analyst at UBS Securities.