Wanda takes steps to repay debt
Loans Conglomerate resists calls for immediate repayment after downgradesBy yAN JIANGDALIAN 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 forthe 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 anoffshore 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 overseasElion highlights Chinese HY risks
Bonds Mainland issuer misses onshore payment, but still plans dollar offeringBy CAROL CHAN, INA ZHOUA Chinese issuer with plans
to sell US dollar bonds missed
a repayment deadline on
its onshore notes last week,
sending a warning sign to
investors already wary of
mounting supply from high-
yield names.
ELION RESOURCES GROUP, a
privately owned company
with diversified business
lines including desert
redevelopment, failed to make
full repayment on a Rmb1.5bn
(US$226m) 7.5% onshore bond
last Tuesday, according to the
Shanghai Clearing House.
The failure came after the
issuer, with a B rating from
S&P, met investors in Hong
Kong and Singapore last month
for a proposed offering of Reg
S US dollar notes. The offering
has not yet taken place.
Elion Resources made the
payment in full a day later,though the missed payment
was seen as a technical default,
as the notes did not have a
grace period.
The company blamed the
delay on technical issues.
“Before the High Value
Payment System (HVPS) was
closed yesterday [Tuesday],
part of the funding intended
to repay the notes did not get
through to SCH’s account,” it
said in a statement.
However, investors and
analysts said the mishap raised
concerns over the company’s
financial discipline and
corporate governance. Two
offshore investors, who met
the issuer last month in Hong
Kong, said they were told
Elion Resources intended to
borrow US dollars to refinance
its onshore notes, raising
questions over its ability to
service the debt.
Elion Resources, a AA+ credit
to Dagong Global, is a frequentissuer in the onshore market,
with outstanding bonds of
Rmb12bn as of last week,
according to the prospectus for
its latest issue.
S&P estimates the company’s
debt-to-ebitda ratio at 6.0x-9.0xfor 2017-18 and said its ratio of
free operating cash flow (FOCF)-
to-debt would remain negative
owing to high working capital
outflow and large capital
expenditure.Last month, Elion Resources
mandated Citic CLSA Securities,
DBS Bank, Founder Securities (Hong
Kong) and HSBC as joint global
coordinators for an offering of
guaranteed US dollar bonds.
A banker on the issue said
the company’s US dollar bond
plan had not been abandoned:
“We are still working with the
company and investors it has
met. We will continue to speak
to investors.”
Another banker said his
bank had been invited to join
the deal to boost its chances of
attracting investors.
“We rejected as the
company’s leverage is too high.
Its business model is also hard
to understand and not easy to
explain to investors,” he said.
Investors are harvesting
decent returns on Chinese
high-yield bonds this year
amid a strong performance
across Asian credit, but the
threat of a potential correctionNews
8 International Financing Review Asia November 25 2017“Investors are
increasing picky due
to the heavy supply,
especially those Single
B first-time issuers.”1019_04 News.indd 8 24/11/2017 21:54: