Hong Kong, June 04, 2018 -- Moody's Investors Service has revised the outlook of the following companies
to stable from negative:
• Dalian Wanda Commercial Management Group Co., Ltd.
(DWCM, formerly Dalian Wanda Commercial Properties Co.,
Ltd.);
• Wanda Commercial Properties (HK) Co. Limited (Wanda HK);
• Wanda Properties Overseas Limited; and
• Wanda Properties International Co. Limited
At the same time, Moody's has affirmed the following ratings:
• DWCM's Ba1 corporate family rating;
• Wanda HK's Ba3 corporate family rating;
• Wanda Properties Overseas Limited's and Wanda Properties
International Co. Limited's Ba3 senior unsecured bond ratings.
Both companies 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.
RATINGS RATIONALE
"The change to a stable ratings outlook reflects our view that the
debt refinancing risk of both DWCM and Wanda HK has substantially reduced
after the repayment of the $1.7 billion offshore bank loans,"
says Kaven Tsang, a Moody's Vice President and Senior Credit Officer.
The offshore debt repayment was funded by disposals of offshore businesses
and transferring out onshore cash. This development is positive
to the company's funding management to service offshore debt obligations.
Moreover, DWCM has a funding plan to repay Wanda HK's guaranteed
notes for $600 million due November 2018.
"The stable ratings outlook also reflects the fact that DWCM will
have adequate cash resources to maintain its onshore property businesses,"
says Tsang who is also the Lead Analyst for DWCM.
At the end of 2017, DWCM reported RMB120.7 billion of cash
on hand. This cash balance and the estimated annual property development
cash inflow of around RMB60 billion over the next 12 months will be more
than adequate to fund its annual construction costs of around RMB78 billion
for its property development business and building new investment commercial
properties.
DWCM's Ba1 corporate family rating (CFR) reflects the company's
established brand name, leading market position, and track
record of developing and managing commercial properties in China.
The Ba1 rating also considers the company's improving business risk,
given that it will exit the relatively more volatile property development
business at the end of the 2020.
During the transition period over the next 2-3 years, Moody's
expects that improvements to the company's credit metrics will not
be material, with debt/EBITDA and EBIT/interest registering around
5.5x and 3x. Nevertheless, these levels will support
its CFR of Ba1.
DWCM's asset-light business model to grow fee revenues is
exposed to asset sell down risk, especially in a down market.
Nevertheless, the company has a good financial buffer against such
risk. Its scale is also large, as measured by total assets
of RMB689 billion ($109 billion) at 31 December 2017. And,
DWCM's liquidity levels are good, as measured by cash on hand
of RMB120 billion ($19 billion) at 31 December 2017, and
high rental income of around RMB24.7 billion ($3.9
billion) in 2017.
DWCM's Ba1 CFR could be upgraded if it achieves growth in rental and management
fee income, such that adjusted debt/EBITDA falls below 4.5x-5.0x,
EBIT/interest rises above 4.0x, and rental and management
fee income/interest register above 2.5x.
On the other hand, the Ba1 CFR could be downgraded if the company
shows: (1) a weak liquidity position; (2) slower-than-expected
growth in rental and management fee income; or (3) a deterioration
in its credit metrics.
Credit metrics indicating rating downgrade pressure include adjusted debt/EBITDA
rising above 6.0x-6.5x, and EBIT/interest falling
below 2.5x on a sustained basis.
Additionally, any evidence of a material leakage of funds from DWCM,
or a notable deterioration in the company's corporate governance and transparency
could pressure its rating.
Moody's has revised Wanda HK's rating outlook to stable from negative,
reflecting Moody's expectation that DWCM will provide financial
support to Wanda HK in times of stress, given the close linkage
between the two companies.
Wanda HK's Ba3 CFR and the Ba3 senior unsecured bond ratings of its guaranteed
bonds reflect the company's standalone credit profile plus two notches
of parental support, based on Moody's assessment that Wanda HK will
likely receive support from DWCM in times of need.
Moody's expectation of support from DWCM to Wanda HK is based on:
(1) Wanda HK remaining 100% owned by DWCM and the parent exercising
management control over Wanda HK; (2) Wanda HK continuing to demonstrate
its position as the primary platform for DWCM's offshore funding and international
expansion; and (3) DWCM showing a track record of extending support
to Wanda HK's offshore financing, through deeds of equity interest
purchase undertakings and keepwell deeds for its bonds, and guarantees
to its bank loans, as well as providing funding for the 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 investments. However,
the fact that the company's operation and financial management are
directly controlled and managed by DWCM could partly mitigate these challenges.
Upward pressure on Wanda HK's CFR could emerge if: (1) DWCM's
CFR is upgraded; and (2) Wanda HK maintains its strategic and economic
importance to DWCM.
On the other hand, a downgrade of DWCM's CFR will result in a downgrade
of Wanda HK's CFR and the ratings on Wanda HK's guaranteed bonds.
Furthermore, Wanda HK's ratings could come under downgrade pressure
if its standalone credit profile deteriorates or there is evidence of
a reduction in: (1) the level of ownership held by DWCM, or
(2) the strategic and economic importance of the company to DWCM.
The principal methodology used in these ratings 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.
Dalian Wanda Commercial Management Group Co., Ltd.
(DWCM) develops, operates and sells integrated properties in China,
including shopping malls, offices, residential properties
and hotels.
Wanda Commercial Properties (HK) Co. Limited was incorporated on
6 February 2013 as the primary offshore funding and investment platform
for DWCM. The company is also a wholly owned subsidiary of DWCM.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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.
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
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
Gary Lau
MD - Corporate Finance
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
