We downgraded Dalian Wanda Commercial Management Grp Co Ltd 's (DWCM) corporate family rating (CFR) to Caa2 from Caa1 with a negative outlook to reflect the deterioration in its liquidity and increase in refinancing risks.

The downgrade followed DWCM's announcement on 21 November 2023 to solicit noteholders' consent to extend the maturity date of its $600 million offshore bond to 29 December 2024 from 29 January 2024, and to repay this bond in four installments in 2024. We consider this transaction a distressed exchange.

DWCM's Caa2 CFR also captures DWCM's private company status and governance risk, particularly its significant related-party transactions with its parent company. It further reflects the potential financial and liquidity impact associated with the obligation of the company to buy back shares of its property management subsidiary from strategic investors if the IPO of the subsidiary cannot be completed by year-end 2023, and the contagion risk from its parent company, Dalian Wanda Group Co., Ltd. (Dalian Wanda Group).

On the other hand, DWCM's CFR reflects its strong brand and track record of developing and operating commercial properties in China, and sizable and recurring leasing and management fee income from its investment property portfolio.