Hong Kong, September 27, 2021 -- Moody's Investors Service has affirmed the following ratings:
• Dalian Wanda Commercial Management Group Co., Ltd.'s
(DWCM) Ba1 corporate family rating (CFR);
• Wanda Commercial Properties (HK) Co. Limited's (Wanda HK)
Ba3 CFR; and
• The Ba3 senior unsecured ratings on the bonds issued by Wanda Properties
Overseas Limited and Wanda Properties International Co. Limited.
Wanda Properties Overseas and Wanda Properties International are wholly
owned subsidiaries of Wanda HK. The rated bonds are guaranteed
by Wanda HK and supported by deeds of equity interest purchase undertakings
and keepwell deeds between DWCM, Wanda HK and the bond trustee.
All the outlooks of the above companies remain stable.
"The rating affirmation reflects DWCM's resilient performance under
the challenging operating environment. It also reflects our expectation
that its liquidity is strong enough to withstand the tight funding condition
towards the China property sector," says Kaven Tsang, a Moody's
Senior Vice President.
RATINGS RATIONALE
DWCM's Ba1 CFR reflects its strong brand and track record of developing
and operating commercial properties in China. The rating also takes
into consideration the company's good liquidity and sizable recurring
leasing and management income from its investment property portfolio,
which provides the company with stable and recurring cash flow.
On the other hand, DWCM's Ba1 CFR is constrained by its high gross
debt level, exposure to lower-tier cities and execution risks
related to its expansion plan amid evolving business conditions,
as well as its private company status. However, corporate
governance risk is partly tempered by the presence of independent directors
and reputable shareholders, such as Tencent Holdings Limited (A1
stable) and other investors, who appoint their representatives to
the board of directors to balance the interests of the shareholders,
creditors and other stakeholders.
DWCM's operations have recovered from the disruption of COVID-19
in the first half (H1) 2020. The company's total revenue
grew 32% to RMB22.8 billion in H1 2021 from RMB17.3
billion in H1 2020. As a result, its net debt/EBITDA improved
to 5.5x in the 12 months ended June 2021, from 6.4x
in 2020. Similarly, its EBITDA/interest coverage strengthened
to 2.8x from 2.4x over the same period.
Moody's forecasts DWCM's adjusted net debt/EBITDA and EBITDA/interest
coverage will improve further to 3.9x-4.2x and 2.8x-3.2x,
respectively, over the next 12-18 months, as the company
will maintain moderate growth in rental income and reduce its debt by
using part of the $6 billion (around RMB39 billion) proceeds from
the pre-IPO exercise of its commercial property management business.
These projected ratios continue to support DWCM's CFR at the Ba1 level.
DWCM's liquidity is good, underpinned by its solid cash holding
of RMB30 billion (including restricted cash of RMB2.5 billion)
as of 30 June 2021, stable rental income of around RMB40 billion-RMB45
billion per annum, and the proceeds raised from the pre-IPO
exercise of its commercial property management business. Moody's
expects these cash resources to be sufficient to cover DWCM's maturing
debt and committed capital expenditure (capex) for its portfolio of shopping
malls over the next 12-18 months.
The affirmation of Wanda HK's Ba3 CFR reflects the company's standalone
credit profile plus a two-notch uplift based on Moody's expectation
that the company will receive support from its parent DWCM in times of
need.
Moody's expectation of support considers DWCM's 100% ownership
of Wanda HK, the parent's full control over the company, and
Wanda HK's role as the primary platform for DWCM's offshore funding and
investment.
Moody's also expects DWCM to maintain its ability to provide support to
Wanda HK, if needed, as reflected by its Ba1 CFR and its track
record of providing timely funding support.
Wanda HK's standalone credit profile is constrained by its small operating
scale, exposure to the seasonality and volatile operating conditions
of its hotel business, weak credit metrics and thin equity base.
These weaknesses are mitigated by its adequate liquidity and the parent's
close control over the company.
The recent termination of hotel management contracts with Sunac China
Holdings Limited (Ba3 positive) will reduce the company's revenue
moderately over the next 1-2 years. However, the impact
would be largely offset by the RMB133 million compensation arrangement.
Wanda HK's liquidity is adequate. Moody's expects Wanda HK's
cash and operating cash flow to be sufficient to cover its maturing debt
over the next 12-18 months. Moody's also expects DWCM
will provide funding support to Wanda HK, if needed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable rating outlook on DWCM reflects Moody's expectation that
DWCM will maintain solid financial metrics support its Ba1 CFR,
and have sufficient cash resources to cover its operating and refinancing
needs over the next 12-18 months.
The stable rating outlook on Wanda HK primarily reflects Moody's
expectation that DWCM will continue to provide financial support to the
company in times of stress, given the close linkages between the
two companies.
DWCM's Ba1 CFR could be upgraded if the company strengthens its corporate
governance and disclosure standards consistent with publicly listed companies,
and achieves its business growth plan and improves its financial metrics,
with adjusted net debt/EBITDA falling below 4.0x-4.5x
and EBITDA/interest coverage increasing above 3.0x-3.5x
on a sustained basis.
On the other hand, DWCM's Ba1 CFR could be downgraded if the company's
liquidity weakens, growth in leasing and management income is slower
than expected or credit metrics deteriorate.
Credit metrics that would be indicative of negative rating pressure include
adjusted net debt/EBITDA rising above 6.0x-6.5x and
EBITDA/interest coverage falling below 2.0x on a sustained basis.
Additionally, any significant leakage of funds from DWCM or a substantial
deterioration in the company's corporate governance and transparency could
strain its rating.
Upward pressure on Wanda HK's CFR could develop if Wanda HK's standalone
credit profile strengthens, DWCM's CFR is upgraded and Wanda
HK's strategic and economic importance to the parent increases.
On the other hand, a downgrade of DWCM's CFR will result in a downgrade
of Wanda HK's CFR and the ratings of its guaranteed bonds.
Furthermore, Wanda HK's rating could face downward pressure if its
standalone credit profile deteriorates, there is a reduction in
the level of ownership by DWCM or the strategic and economic importance
of the company to DWCM reduces.
The principal methodology used in rating Dalian Wanda Commercial Management
Grp Co., Ltd. was REITs and Other Commercial Real
Estate Firms Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1272320.
The principal methodology used in rating Wanda Commercial Properties (HK)
Co. Limited, Wanda Properties International Co. Limited,
and Wanda Properties Overseas Limited was Business and Consumer Service
Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
Dalian Wanda Commercial Management Group Co., Ltd.
(DWCM) develops and operates commercial properties in China. As
of the end of June 2021, the company operated 382 retail malls across
more than 160 cities in China.
As of 31 December 2020, the company was 44.99% owned
by Dalian Wanda Group Co., Ltd. (Dalian Wanda Group).
The chairman of Dalian Wanda Group, Wang Jianlin, also directly
and indirectly owned 52.04% stake in the company as of the
same date. Additionally, an investment consortium led by
Tencent and comprising JD.com, Inc. (Baa1 stable),
Sunac China Holdings Limited (Sunac, Ba3 positive) and Suning Commerce
Group Co., Ltd. (Suning) owned a 14.2%
stake in the company.
Wanda Commercial Properties (HK) Co. Limited (Ba3 stable) is the
primary offshore funding and investment platform for DWCM. The
company's main assets include a 65.04% equity interest in
Hong Kong-listed Wanda Hotel Development Company Limited,
as well as investments in one overseas properties and hotel project in
the US.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
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am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Kaven Tsang
Senior Vice President
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
Franco Leung
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
