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- On 21 November, Dalian Wanda Commercial Management Group Co Ltd ("Wanda") announced the consent solicitation for DALWAN 7.250% 29Jan2024 Corp (USD), planning to extend the maturity by 11 months to 29 December 2024. The outstanding amount of the bond is around USD 600 million.
- The voting deadline is on 8 December 2023, and if the scheme is passed, bondholders who vote in favour will receive a base consent fee equal to 0.25% of the principal amount. If bondholders vote in favour earlier than 29 November 2023, they will receive an early consent fee equal to 1% of the principal amount.
- The bond is under the UK law, and the Consent Solicitation for the extension requires the participation of more than 66% of the outstanding bondholders and will be approved if more than 50% of the participants agree. Besides, there are some amendments to the default clauses, and Wanda waives the event of cross defaults.
- The bond is embedded with mandatory redemption clauses that will require the payment of 10% of the principal on 5 January 2024, 20% of the principal on 29 May 2024, and 30% of the principal on 29 September 2024.
- Wanda attributes the rollover to a liquidity crunch, because the company repaid its debt of over RMB 18 billion year-to-date, but has not made as much progress as expected on fundraising. As mentioned in our research article "Bond Update: Is Wanda About to Default?” in July this year, Wanda’s cash to short-term debt ratio stood at 0.3x with a funding shortfall of RMB 52 billion ending 30 June 2023, suggesting the actual liquidity is close to the distressed level. So this rollover is nothing surprising.
- The company successfully repaid an offshore bond with a principal amount of USD 400 million on 23 July 2023 amidst a lot of scepticisms, bringing a positive twist to the market's view of the company's short-term liquidity, with the bond due in January 2024 trading at close to $70. However, after the announcement of rollover, the bond price sharply dropped to $50.
- Apart from the bond due in January 2024, Wanda also has two USD bonds maturing in 2025 and 2026, which are not included in the rollover scheme. Considering that Wanda added some mandate redemption clauses to the bond, it reflects the company's confidence in the improvement of liquidity in the coming year and, to a certain extent, its strong willingness to repay the bond.
- It is important to take note that the success of the IPO of Zhuhai Wanda Commercial Management Group ("Zhuhai Wanda"), a Wanda subsidiary, is the critical factor determining the future fate of Wanda. According to strategic investment agreements, the company is supposed to repay around RMB 30 billion to investors for the share repurchase if Zhuhai Wanda fails to be listed by the end of 2023. Additionally, it would also trigger the early repayment of about RMB 10 billion of offshore bank loans.
- Even though Zhuhai Wanda submitted IPO applications multiple times after the expiration of the prospectus, and up to now the company has applied for the fourth time, no substantial progress has been made so far. With around one month remaining before the end of this year, we believe the possibility of a successful IPO is very unlikely.
- As a matter of fact, it is reported that Wanda is in discussion with investors on deferring the payment of the RMB 30 billion share repurchase, and the proposal includes the payment in amortization within four years and the pledge of shares of Zhuhai Wanda, but the tentative proposal has not been accepted by the investors.
- Given the relatively low requirement of the Consent Solicitation, it is expected that the rollover scheme will pass. However, if Zhuhai Wanda fails in the IPO, the repayment of share repurchases, whether in full or in instalments, will further worsen its liquidity, leaving significant uncertainty on the payment of the remaining principal amount of the bond as scheduled. Considering the fact that the current bond price is still favourable, bondholders may sell the bond of Wanda as a potential option.
(The above information is for reference only and the details are subject to the original announcement)
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.
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