October 17, 2017 / 9:58 AM / 2 months ago

Fitch: Wanda's Negative Watch Expected to Be Resolved by End-November

(The following statement was released by the rating agency) HONG KONG/SHANGHAI, October 17 (Fitch) Fitch Ratings expects to resolve Dalian Wanda Commercial Property Co. Ltd.'s (Wanda; BBB/RWN) Rating Watch Negative by end-November 2017. This is the timeframe in which Wanda expects to reach an agreement with the participating banks of its offshore syndicated loans on the treatment of these debt facilities' acceleration clauses, which were triggered by other rating agencies' credit downgrades of Wanda in late September 2017. Fitch placed Wanda's ratings on Watch Negative on 6 October 2017 due to the lack of clarity over the adequacy of Wanda's offshore liquidity to fully address any repayment demands if these loan facilities were accelerated. Should Wanda fail to satisfy any payment demands arising from an acceleration of credit facilities, certain creditor protection measures attached to its other debt obligations could also be triggered, including cross-default clauses, potentially placing significant stress on the company's overall liquidity position and severely weakening its credit profile. We had commented that Wanda's failure to provide a comprehensive plan in addressing its offshore liquidity needs before 20 October 2017 could lead to negative rating action. On 13 October 2017, Fitch obtained updates from Wanda on its plan to address its offshore liquidity. Fitch believes Wanda will likely be able to resolve its offshore liquidity situation with no long-term reduction in its credit quality. Wanda is in negotiations with its bankers to address the situation in relation to the acceleration clauses and management has informed us that none of its bankers has to date demanded repayment for the loan, and thus it is not facing any immediate offshore liquidity needs that it lacks the offshore funds to address. As per Wanda's management, the majority of Wanda's lenders are its long-term bankers and are likely to stay committed to continuing with the loans. Furthermore, we also believe that Wanda has the option to transfer onshore funds to pay off any banks which demand early repayments if its offshore liquidity is insufficient. Wanda's management has shared with Fitch that the offshore loans are guaranteed by the company and most of the guarantees have been registered with the State Administration of Foreign Exchange (SAFE). As such, Wanda should be in a position to rely on its strong onshore liquidity to service most of its offshore syndicated loans; as offshore remittance requires SAFE's approval. At the same time, we understand that Wanda is also exploring offshore secured loans backed by its offshore assets to expand its funding channels. Unlike Wanda's other debts, its USD1.2 billion of offshore bonds contain cross-default clauses that may be triggered as a result of the acceleration of other debt obligations. Wanda's operational strength and its improving recurring EBITDA/interest coverage that we expect will rise to 1.5x in 2018 make it less likely that the US dollar bondholders will seek to trigger a liquidity event. While we believe Wanda is likely to be able to resolve the situation at hand in a manner that is not detrimental to its long-term credit quality, the Rating Watch Negative indicates the prospect for a multiple-notch rating downgrade should the company fail to pay any of its offshore loans that become due, or it appears that the company is unlikely to be able to meet its immediate offshore liquidity needs in a timely manner. We expect a resolution to be reached by the end of November; however, significant delays in arriving at a resolution may lead to further negative rating action, as it may be indicative of heightened uncertainty over the resolution of its offshore liquidity risk and is a sign of management weakness in managing its offshore liquidity. Contact: Su Aik Lim Senior Director +852 2263 9914 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Chloe He Associate Director +86 21 5097 3015 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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