Hong Kong, November 22, 2019 -- Moody's Investors Service has assigned a Ba3 senior unsecured rating to
the proposed notes to be issued by Wanda Properties Overseas Limited,
a wholly owned subsidiary of Wanda Commercial Properties (Hong Kong) Co.
Limited (Wanda HK, Ba3 stable).
The outlook is stable.
The proposed notes will be guaranteed by Wanda HK, which is a wholly-owned
subsidiary of Dalian Wanda Commercial Management Group Co.,
Ltd. (DWCM, Ba1 stable, together: the Dalian
Wanda Group).
In addition, the proposed notes will also be supported by a deed
of equity interest purchase undertaking and a keepwell deed between DWCM,
Wanda HK, Wanda Properties Overseas Limited and the bond trustee.
The note proceeds will be used mainly to refinance Dalian Wanda Group's
existing debt.
RATINGS RATIONALE
"The proposed notes issuance will slightly lengthen the group's
debt maturity profile without materially affecting the two companies'
credit metrics, as they plan to use the proceeds mainly to refinance
existing debt," says Kaven Tsang, a Moody's Senior Vice President.
Wanda HK's Ba3 corporate family rating (CFR) incorporates the company's
standalone credit profile and a two-notch uplift, reflecting
Moody's expectation that DWCM will provide financial support to
Wanda HK in times of need.
Moody's assumption of support reflects (1) Wanda HK's 100%
ownership by DWCM and the parent's management control over the company;
(2) Wanda HK's role as the primary platform for DWCM's offshore
funding and international expansion; and (3) the parent's track record
of extending support to the company's offshore financing, through
deeds of equity interest purchase undertakings and keepwell deeds for
its bonds, guarantees to its bank loans, and funding for its
loan repayment.
Wanda HK's standalone credit profile reflects its small scale, weak
credit metrics and thin equity base, given its role as the group's
core platform for offshore funding and overseas investment. However,
these risks are partly mitigated by the fact that the company's
operations and financial management are directly controlled and managed
by DWCM.
The stable outlook on Wanda HK's rating primarily reflects Moody's
expectation that DWCM will provide financial support to the company in
times of stress, given the close links between the two companies.
Moody's also expects that DWCM will have the ability to provide
support, if needed, as reflected by its Ba1 CFR.
DWCM's Ba1 CFR reflects its strong brand and track record of developing
and managing commercial properties in China. The CFR also considers
its declining business risk, as it plans to gradually exit the more
volatile property development business by 2020.
Additionally, the Ba1 CFR reflects the execution risks associated
with DWCM's transformation into an asset-light business model.
This risk is partly mitigated by its strong cash position and high recurring
income, which provide a healthy financial buffer.
Moody's expects DWCM's debt/EBITDA will rise to 6.0x-6.5x
in 2020 from 5.6x for the 12 months ended June 2019, while
EBIT/interest should fall to around 3.0x from 3.2x.
Such weakening will be the result of declining revenue from the company's
shrinking property development business. Nevertheless, these
metrics remain appropriate for its Ba1 CFR.
In terms of environmental, social and governance (ESG) factors,
the Ba1 CFR also considers DWCM's corporate governance and transparency,
given its private company status. This risk is partly mitigated
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 liquidity is adequate. As of September 2019, DWCM's
RMB60.1 billion in cash on hand could fully cover its RMB43.3
billion in short-term debt. Moody's expects the company's
cash and operating cash flow will be sufficient to cover its short-term
debt, committed land payments and capital spending over the next
12 months.
DWCM's stable outlook reflects Moody's expectation that the
company will maintain stable financial metrics and have adequate cash
resources to support its operating and refinancing needs.
The Ba3 senior unsecured rating of the proposed notes reflects Moody's
expectation that DWCM will provide financial support by honoring its obligations
under the deed of equity interest purchase undertaking and keepwell deed
rather than through a payment guarantee.
The Ba3 senior unsecured rating is also unaffected by subordination to
claims at the operating companies because Moody's expects support
from DWCM to flow through the holding company rather than directly to
the main operating companies, thereby mitigating any differences
in expected loss that could result from structural subordination.
Upward pressure on Wanda HK's CFR and on the senior unsecured ratings
of its guaranteed bonds could develop if (1) DWCM's CFR is upgraded,
and (2) the company maintains its strategic and economic importance to
the parent.
However, 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 downgrade pressure if
its standalone credit profile deteriorates or if there is a reduction
in (1) the level of ownership by DWCM, or (2) the strategic and
economic importance of the company to DWCM.
The principal methodology used in this rating was Homebuilding And Property
Development Industry published in January 2018. Please see the
Rating Methodologies page on www.moodys.com for a copy of
this methodology.
Wanda Commercial Properties (Hong Kong) Co. Limited was incorporated
on 6 February 2013 as the sole offshore funding and investment platform
for Dalian Wanda Commercial Management Group Co., Ltd.
It is also a wholly-owned subsidiary of Dalian Wanda Commercial
Management Group Co., Ltd.
Dalian Wanda Commercial Management Group Co., Ltd.
develops, operates and sells integrated properties --
including shopping malls, offices, residential houses,
and hotels -- in China. As of 30 June 2019,
the company operated 289 Wanda Plaza retail malls across more than 160
cities in China.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. Unless
noted in the Regulatory Disclosures as a Non-Participating Entity,
the rated entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of
its ratings process. Please refer to www.moodys.com
for the Regulatory Disclosures for each credit rating action under the
ratings tab on the issuer/entity page and for details of Moody's
Policy for Designating Non-Participating Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
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
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
