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Announcement:

Moody's: Lawsuit against China Wanda's parent is credit negative

14 Nov 2018

Hong Kong, November 14, 2018 -- Moody's Investors Service says that the lawsuit and potential guarantor obligation of Wanda Holdings Group Co., Ltd. (Wanda Holdings), the parent company of China Wanda Group Co., Ltd (China Wanda), raise the risk of contingent liabilities crystallizing for China Wanda, but have no immediate impact on its B1 corporate family rating (CFR) or its stable outlook.

On 13 November 2018, China Wanda announced that its parent - Wanda Holdings -- had been summoned as the third defendant by the Qingdao branch of the Bank of Hebei Co., Ltd. on 25 September 2018 for a failure to fulfill its guarantor obligation. The lawsuit followed the missed principal payment of RMB138 million by a subsidiary of Shandong Snton Group Co., Ltd (Snton), for which Wanda Holdings had acted as a guarantor.

In addition to the guarantee from Wanda Holdings, China Wanda has also provided an external guarantee to Snton. The amount of the guarantee was RMB1.28 billion as of March 2018 — which has been factored into its adjusted leverage — and accounted for 8.1% of total adjusted debt as of 30 September 2018 and 18.2% of its total cash balance as of the same date.

The lawsuit against Wanda Holdings is credit negative for China Wanda, because it raises the risk of contingent liabilities crystallizing related to China Wanda's external guarantee provided to Snton, given also evidence of an inter-company loan provided by China Wanda to its parent.

This risk is partly mitigated by China Wanda's adequate liquidity position. At 30 September 2018, its cash, including restricted cash, of RMB7.0 billion and expected operating cash flow of around RMB4 billion were sufficient to cover its short-term obligations and the external guarantee to Snton.

Moody's will closely monitor the situation over the next 6 to 12 months and the impact on China Wanda's business operations and liquidity position, including but not limited any potential impact on the support that it receives from its banking relationships.

China Wanda's B1 CFR would come under pressure if the company fails to service any debt outstanding or any potential contingent liabilities, including the external guarantee extended to Snton, and/or if the company shows weaker transparency and corporate governance.

Moody's also expects to see: (1) meaningful progress in the legal proceedings against Wanda Holdings that lowers concerns over the potential impact on China Wanda's operation and liquidity; and (2) a reduction in China Wanda's external guarantee to Snton over the next 6 to 12 months. Any signs of deviation from these expectations would also pressure the company's rating.

The principal methodology used in this rating was Refining and Marketing Industry published in November 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Founded in 1988 and headquartered in Dongying, Shandong, China Wanda Group Co., Ltd is a privately-owned company operating multiple business segments including (1) refining, mainly refineries of diesel and gasoline; (2) tire production; (3) the manufacture of electric cables; (4) the manufacture of chemical products including methacrylate butadiene styrene and polyacrylamide; and (5) electronics, including the production of polyimide film.

At the end of 2017, Shang Jiyong, the company's chairman, indirectly owned 26% of the company via Wanda Holdings Group Co., Ltd.

Wanda Holdings, which owns 50.24% of the company, is a privately-owned company engaged in other businesses such as ports operations, trading, real estate development and construction.

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.

Chenyi Lu
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
Client Service: 852 3551 3077

Clement Cheuk Yiu Wong
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 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
Client Service: 852 3551 3077

No Related Data.
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