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Announcement:

Moody's: Dalian Wanda Commercial Properties' privatization is credit negative

02 Jun 2016

Hong Kong, June 02, 2016 -- Moody's Investors Service says that the conditional offer made by Dalian Wanda Group Co. Ltd. (unrated) and a consortium of investors to buy out all of Dalian Wanda Commercial Properties Co., Ltd.'s (DWCP, Baa2 negative) H shares -- if it proceeds -- is credit negative to DWCP.

However, there is no immediate impact on DWCP's Baa2 issuer rating, or any of the following ratings:

- The Baa3 issuer rating of Wanda Commercial Properties (HK) Co. Limited (Wanda HK)

- The Baa3 backed senior unsecured ratings assigned to the bonds issued by Wanda Properties International Co. Limited and Wanda Properties Overseas Limited

Wanda HK, Wanda Properties International, and Wanda Properties Overseas are wholly owned subsidiaries of Wanda HK and their bonds are guaranteed by Wanda HK.

The bonds are also supported by Deeds of Equity Interest Purchase Undertaking and Keepwell Deeds between DWCP, Wanda HK and the bond trustee. The issuers have also maintained in interest reserve accounts the equivalent of two periods of interest payments on the bonds.

The ratings outlook remains negative.

On 30 May 2016, DWCP announced that its controlling shareholder, Dalian Wanda Group Co. Ltd., and a consortium of investors, had made a voluntary conditional general offer to buy out all of DWCP's H shares at a price of HKD52.8 per share in cash.

The offer is subject to shareholders and regulatory approvals. But, if successful, this transaction would lead to the privatization and de-listing of DWCP from the Hong Kong Stock Exchange.

"The privatization could reduce the company's corporate transparency and timeliness of information disclosures, as well as undermine DWCP's corporate governance structure and raise concerns over potential fund leakage," says Kaven Tsang, a Moody's Vice President and Senior Credit Officer.

Moody's notes that Dalian Wanda Group has made a commitment to its investors that it would buy back the shares of DWCP at the offer price plus a return of 8% or 10% per annum, if DWCP were not listed in China (Aa3 negative) within two years from the date of de-listing.

Such a commitment could raise Dalian Wanda Group's funding requirements and negatively affect DWCP's liquidity and credit profile if Dalian Wanda Group channels fund from DWCP for its needs after the privatization.

Any evidence of material fund leakage from DWCP could pressure its rating.

Moody's further notes that DWCP is planning an IPO on China's A-share market, but its access to equity funding -- once it becomes privatized -- will remain constrained until the listing materializes. The timing of listing on the A-share market also remains uncertain.

This risk is however partially mitigated by DWCP's established access to the domestic and offshore debt markets. It raised a total of RMB55 billion from July 2015 to May 2016 by issuing domestic corporate bonds and medium-term notes. In addition, it issued USD1.2 billion in offshore bonds from 2013 to 2014.

As of 30 May 2016, DWCP had a total issued share capital of 652,547,600 H shares and 3,874,800,000 domestic shares. Dalian Wanda Group holds 1,979,000,000 domestic shares, or 43.71% of DWCP's total issued shares. Total consideration for the general offer will be around HKD34.5 billion.

The principal methodology used in these ratings was Homebuilding And Property Development Industry published in April 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Dalian Wanda Commercial Properties Co., Ltd. (DWCP) develops, operates and sells integrated properties in China, including shopping malls, offices, residential houses and hotels. It is one of the largest property companies in China with contracted sales of RMB164 billion in 2015.

Wanda Commercial Properties (HK) Co. Limited was incorporated on 6 February 2013 as the primary offshore funding and investment platform for DWCP. It is also a wholly-owned subsidiary of DWCP.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Kaven Tsang
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's: Dalian Wanda Commercial Properties' privatization is credit negative
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