China latest credit scare sends Wanda dollar bonds tumbling

HONG KONG – Dalian Wanda Group has become the latest source of angst in China's credit market, with US dollar bonds of billionaire Wang Jianlin's conglomerate sinking toward distressed levels just months after they were issued.

The sell-off has accelerated in recent days as investors brace for a potential surge in cash outlays by the group. Wanda and its units could face the equivalent of US$1.9 billion (S$2.5 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.

Concerns about Wanda's debt have increased amid uncertainty about a potential initial public offering (IPO) 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 (S$5.8 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 US$1.3 billion give lenders the option to require early repayment if the shopping-mall unit doesn't list by May.

Yields on the two notes sold by Wanda Properties Global have surged to more than 25 per cent, Bloomberg-compiled data show, more than double the level at issuance early this year. 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.

“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. Time isn't on the IPO's side and further delays could put pressure on Wanda to negotiate over its debt, he added.

Struggles in China's property sector prompted prior delays for the IPO, Bloomberg previously reported.

The two Wanda notes 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. Some analysts have warned of a polarised recovery largely benefiting state-owned developers while liquidity pressures could continue for private-sector peers.

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.