Wanda commercial management unit’s bond falls to record low after S&P cuts rating, questioning its ability to repay debt due on Sunday

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The price of a US$600 million bond due in January 2024 slumped by 15.5 cents to 29.75 cents on Thursday, its lowest on record

Rout came after S&P cut to “CCC” from “BB-” the rating for Wanda Commercial’s US$400 million 2023 bond due on Sunday, after lowering the rating from “B+” on Monday

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A Dalian Wanda Group mall in Shanghai. Wanda Commercial is 44 per cent owned by the developer. Photo: Bloomberg

Zhang Shidongin Shanghai

Published: 7:05pm, 20 Jul 2023

Bonds of Dalian Wanda Commercial Management Group, a unit of China’s biggest commercial property developer, tumbled on Thursday after ratings agency S&P Global downgraded its notes for a second time this week, questioning its ability to repay its debts.

The price of a US$600 million bond due in January 2024 slumped by 15.5 cents to 29.75 cents, its lowest on record. The company’s debt maturing in 2025 and 2026 was largely steady.

The rout came after S&P cut to speculative grade “CCC” from “BB-” the rating for Wanda Commercial’s US$400 million 2023 bond due on Sunday along with US$13.8 million in interest payments, citing an increasing risk of non-payment. The agency said that Wanda Commercial had only about US$200 million in accessible onshore cash. The rating on the bond was lowered to “BB-” from “B+” on Monday.

The episode underscores the lingering risks in China’s property market, which has resumed a decline after a short-lived rebound early in the year. The recent saga of China Evergrande Group’s huge annual loss of 105.9 billion yuan (US$14.7 billion) and the debt default by Sino-Ocean Group Holding are a stark reminder to investors that the crisis is far from over.

Official statistics also show that prices of lived-in homes in China’s biggest cities including Shanghai began to decline last month, signalling weak demand as potential buyers stay on the sidelines amid a dim outlook for the economy.