Fitch Ratings has downgraded the Long-Term Foreign-Currency Issuer Default Rating (IDR) on
Fitch has also downgraded the rating on US dollar notes guaranteed by Wanda HK and issued by Wanda Commercial's subsidiaries to 'C', from 'B-'. The Recovery Rating is 'RR4'. All the ratings have been removed from Rating Watch Negative.
The downgrades follow Wanda Commercial's failure to pay a coupon on its
Key Rating Drivers
Missed Bond Coupon Payment: Management confirmed to Fitch that Wanda Commercial did not pay a coupon due on
Bond Repayment Uncertain: Wanda Commercial is still in the process of preparing sufficient funds to repay the
Parental Linkage Considerations: Fitch no longer applies our Parent and Subsidiary Linkage (PSL) Rating Criteria to assess the linkage between
Fitch rates Wanda HK and Wanda Commercial based on the PSL criteria. The companies' IDRs are the same, as we assess their Standalone Credit Profiles as being equal in a distressed scenario. Wanda HK is Wanda Commercial's fully owned sole offshore financing platform and overseas investment-holding company.
Derivation Summary
The ratings on Wanda Commercial and Wanda HK reflect the non-payment of the bond interest and its entry into the 10-day grace period.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Available cash balance, including 40% of wealth-management products, maintained at
No equity financing cash inflow due to timing uncertainty.
Recovery Rating on Wanda HK
The calculation is based on 2021 annual results, as no 1H22 or 2022 results are available. The recovery analysis assumes that Wanda HK would be liquidated in a bankruptcy. Fitch assumes a 10% administrative claim.
Liquidation Approach
The liquidation estimate reflects Fitch's view of the value of balance-sheet assets that can be realised in the sale or liquidation processes conducted during a bankruptcy or insolvency proceeding and distributed to creditors.
Advance rate of 0% is applied to excess cash after netting off payables and other payables.
Advance rate of 50% is applied to investment properties, supported by Wanda HK's hotels and shopping malls, which generate rental yields of above 6%.
Advance rate of 70% is applied to accounts receivable. This is more conservative than the 80% in Fitch's criteria, as the ending balance is outdated.
The allocation of value in the liability waterfall results in a Recovery Rating corresponding to 'RR3' for offshore senior debt. However, the Recovery Rating is capped at 'RR4', because under Fitch's Country-Specific Treatment of Recovery Ratings Criteria,
RATING SENSITIVITIES
Wanda Commercial and Wanda HK
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Resolution of the missed interest payment for the 2025 bond within the grace period and repayment of the
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Failure to pay the interest due on the 2025 bond within the grace period or repay the principal of the
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Issuer Profile
Wanda Commercial is
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Wanda Commercial has an ESG Relevance Score of '4' for Financial Transparency, because
Wanda Commercial has an ESG Relevance Score of '4' for Group Structure, because there is a lack of transparency, particularly in intra-group transactions between
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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