Rating Action Overview
- The result and timing of the listing of Zhuhai Wanda Commercial Management Group Co. Ltd. (Zhuhai Wanda), a subsidiary of China-based Dalian Wanda Commercial Management Group Co. Ltd (Wanda Commercial), is uncertain, in our view. The listing is yet to receive approval from the China Securities Regulatory Commission (CSRC).
- If Zhuhai Wanda fails to be listed by end-2023 and pre-IPO investors choose to exercise their put option to withdraw their investments, the liquidity and financial metrics of Wanda Commercial and Dalian Wanda Group (DWG) will likely deteriorate. The banking and other funding relationships of Wanda Commercial and DWG could also be tested.
- On April 28, 2023, S&P Global Ratings placed on CreditWatch with negative implications the following ratings: its 'BB+' long-term issuer credit rating on Wanda Commercial, its 'BB' long-term issuer credit ratings on Wanda HK, and its 'BB' long-term issue rating on the senior unsecured notes that Wanda HK guarantees.
- We expect to resolve the CreditWatch once we have the details that allow us to assess the likelihood of the listing of Zhuhai Wanda, Wanda Commercial's other back-up plans, and to assess the credit profile and liquidity position of Wanda Commercial and DWG.
Rating Action Rationale
We placed the ratings on CreditWatch with negative implications to reflect a lack of clarity on the result and timing of the listing of Zhuhai Wanda. The listing is yet to receive approval from CSRC, and the hearings from the Stock Exchange of Hong Kong Ltd. The listing will also depend on the appetite of equity investors for the IPO. Funds to receive from IPO (if successful) is therefore uncertain as well. The company missed its previous targets of getting approval from the CSRC by end-2022 and subsequently within the first quarter of 2023. This is partly due to force majeure factors such as outbreak of COVID-19 in China, and the recent reorganization of financial regulators.
If the listing of Zhuhai Wanda fails, the liquidity and credit profile of Wanda Commercial and DWG may deteriorate. This is partly because of a potential obligation to buy back all pre-IPO shares totaling Chinese renminbi (RMB) 38.1 billion (plus other guaranteed return compensation), which we treat as debt in our analysis. It also because the relationships Wanda Commercial and DWG have with other financial institutions such as banks and trusts are also likely to be tested. For example, DWG has a certain amount of syndicated loans that contain prepayment options. Under these options, the lending banks could require full prepayment from DWG if Zhuhai Wanda fails to be listed by an agreed date within 2023. Therefore, any confirmed and practicable back-up plans such as successful negotiations with pre-IPO investors to extend investments and talks with financial institutions to maintain solid relationships may also affect our view on the liquidity of Wanda Commercial and DWG.
We expect Wanda Commercial's total cash balance and short-term investments to diminish as of end-2022, compared with end-June 2022. This anticipated decline stems from debt repayment by internal resources in the second half of 2022. Wanda Commercial is the first privately owned China-based enterprise to resume offshore capital market financing in 2023; it has a track record of smooth financing channels, both onshore and offshore. That said, an unsuccessful IPO of Zhuhai Wanda could burden Wanda Commercial and DWG's financial obligations and weaken its financing capabilities, thereby weighing on liquidity.
CreditWatch
We expect to resolve the CreditWatch as soon as practicable. Once we have more details, we will be better placed to assess the likelihood of the listing of Zhuhai Wanda as well as Wanda Commercial's other back-up plans. Such plans may include the outcomes of the negotiations with pre-IPO investors and other financing channels. More details will also allow us to assess the liquidity positions and credit profiles of Wanda Commercial and DWG.
We may lower the rating on Wanda Commercial if we confirm that Zhuhai Wanda's IPO is unlikely to happen, and Wanda Commercial and DWG fail to implement practical alternatives to maintain their liquidity.
Alternatively, we may affirm the rating if Zhuhai Wanda's IPO is completed, or if Wanda Commercial and DWG are able to implement a backup plan to solve liquidity issues and maintain solid financing channels in the event Zhuhai Wanda's IPO fails.
Company Description
Wanda Commercial invests in, develops, operates, manages, and leases commercial properties in China. It also owns and manages self-branded hotels. The company offers its commercial properties primarily under the Wanda Plaza brand. Formerly known as Dalian Wanda Commercial Properties Co. Ltd., Wanda Commercial was founded in 1988 and is based in Beijing.
DWG, which holds a 44.31% equity interest in Wanda Commercial as of Sept. 30, 2022, is a Chinese conglomerate with a diverse range of businesses. As of end-2022, the group was China's largest owner and operator of shopping centers (through Wanda Commercial); China's largest cinema operator; one of the world's largest sports events, media, and market platforms; and China's leading children's entertainment and education franchise.
The founder, Mr. Wang Jianlin, together with his family members directly and indirectly held 100% of DWG, and in turn owned 53.39% of Wanda Commercial as of Sept. 30, 2022. Tencent Holdings Ltd., Suning.com Co. Ltd., Sunac China Holdings Ltd., and JD.com Inc. also hold 14.19% equity interest in total in Wanda Commercial through their wholly-owned subsidiaries.
Related Criteria
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- General Criteria: Group Rating Methodology, July 1, 2019
- Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019
- Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March 28, 2018
- Criteria | Corporates | Industrials: Key Credit Factors For The Real Estate Industry, Feb. 26, 2018
- Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
- General Criteria: Methodology: Industry Risk, Nov. 19, 2013
- General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
- Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013
- General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities, Nov. 13, 2012
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Ratings List
| Ratings Affirmed; CreditWatch | ||
|---|---|---|
| To | From | |
|
Dalian Wanda Commercial Management Group Co. Ltd |
||
| Issuer Credit Rating | BB+/Watch Neg/-- | BB+/Negative/-- |
|
Wanda Commercial Properties (Hong Kong) Co. Ltd. |
||
| Issuer Credit Rating | BB/Watch Neg/-- | BB/Negative/-- |
|
Wanda Properties International Co. Ltd. |
||
| Senior Unsecured | BB/Watch Neg | BB |
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Iris Cheng, Hong Kong 2533 3578; iris.cheng@spglobal.com |
| Secondary Contact: | Esther Liu, Hong Kong + 852 2533 3556; esther.liu@spglobal.com |
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