November 24, 2017 / 10:42 AM / a year ago

Wanda to repay offshore debt in three steps

* Loans: Conglomerate resists calls for immediate repayment after downgrades

By Yan Jiang

HONG KONG, Nov 24 (TRLPC) - Dalian Wanda Commercial Properties is proposing to repay US$1.7325bn of offshore loans within six months after ratings downgrades triggered mandatory repayments, according to sources.

The property-to-cinema conglomerate told banks earlier this month that its commercial property unit planned to repay four loans in full by May, resisting some lenders’ calls for immediate repayment.

Wanda has proposed to repay 10% of the outstanding amount by the end of November, another 30% by the end of March and the remainder by May 23.

The repayments will take place on pro-rata basis for the four three-year loans: a US$500m bullet due next May, a US$350m facility and a US$400m bullet due in June 2019 and a US$482.5m bullet due in December 2019.

However, there are concerns among banks over whether or not Wanda can deliver its plan.

“Wanda should make full and immediate repayment as required under the loan agreements, but it can’t,” said a banker at one of the lenders with exposure to the loans.

Wanda declined to comment.

Last month, Standard Chartered and 12 other banks involved in the US$400m and US$482.5m loans due in June and December 2019, respectively, formed a committee to accelerate discussions with Wanda.

That followed ratings downgrades in late September for Dalian Wanda Commercial Properties and the conglomerate’s subsidiary, Wanda Commercial Properties (Hong Kong). The former is a guarantor and the latter is a borrower on at least three of the four loans.

On September 29, Moody’s cut the ratings of Dalian Wanda to Ba1 from Baa3 following in the footsteps of S&P, which had slashed the ratings to BB from BBB− a day earlier. Moody’s cited the company’s inadequate offshore cash to meet the potential repayment of its offshore bank loans as one of the reasons for the downgrade. FUNDING SOURCES Wanda has told some banks that it is considering an offshore bond issue as an option to raise some funds to service the loans. So far, it has been paying interest promptly on its loans.

Wanda could issue short-term commercial paper or bonds offshore without requiring regulatory approval from China’s National Development and Reform Commission, which oversees Chinese companies’ issues of foreign debt with maturities longer than a year.

However, the price it would have to pay would be high as evident in the fundraising for another Chinese conglomerate. Earlier this month, HNA Group raised US$300m via 363-day notes at a yield of 8.875%, significantly higher than it paid previously on loan market borrowings.

Wanda, HNA and some other Chinese entities have been under tight regulatory scrutiny this year after overseas acquisition binges in the past few years. ASSET SALES Meanwhile, Wanda denied a report last week in the South China Morning Post that it was looking to sell US$5bn of overseas properties to a single buyer.

“The company has not entered into negotiations with any third party regarding the sale of the group’s property projects for US$5bn,” said Wanda Hotel Development, a Hong Kong-listed unit of the group.

“Following the recent changes in some directors of the company, the company is undertaking a strategic review of its property projects and will consider any business opportunities which can create value for shareholders.”

Disposal of offshore assets was one of the options some lenders had discussed earlier with Wanda.

“If Wanda can sell some of its overseas projects, it is a piece of good news for the offshore creditors,” said a second banker.

Wanda’s landmark projects overseas include the One Nine Elms in London, One Circular Quay in Sydney, a Gold Coast development near Surfers Paradise and the Vista Tower in Chicago. All are under development, according to a November 21 Reuters report.

Wanda announced the sale of an onshore portfolio of tourism and hotels for Rmb63.7bn (US$9.3bn) in July. However, some lenders had asked lawyers to look into whether or not the sale had breached the terms of the loan due in January 2020.

The abrupt asset disposal was one of the reasons for S&P’s downgrade of Wanda as the agency grew concerned about the uncertainty over the company’s change in business model. (Reporting By Yan Jiang; Editing by Prakash Chakravarti and Chris Mangham)

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