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Moody’s on Friday evening downgraded the credit ratings for Chinese conglomerate Dalian Wanda’s property and hotel chain units to junk levels, a day after S&P Global lowered its outlook on the firm to below investment grade.
A previous Baa3, or lower-medium investment grade rating for the Dalian Wanda Commercial Properties’ (DWCP) bonds was further lowered to Ba1 or a "speculative" position. Ratings for Wanda Commercial Properties (HK), has similarly been cut to junk.
The rating firm cited the compromised liquidity status of the company for the downgrade, saying that they might not have sufficient capital offshore to pay off around 1.7 billion US dollars of bank loans.
"Such weak liquidity and treasury management — in particular, the mismatch in offshore cash resources to offshore debt payment obligations — no longer supports its investment grade profile," said Moody’s in its rating rationale, a move that comes nearly a year since China began maintaining a tighter watch over outbound capital flow.
This move comes close on the heels of S&P’s downgrade on Thursday which saw DWCP’s credit rating lowered to BB from BBB-, the lowest tier for an investment-grade bond, and Wanda HK to ‘BB- from BB+, which similarly categorized it under the junk category.
S&P believed that one of the reasons for the downgrade was Wanda’s abrupt decision to sell the bulk of its property development projects and its entire hotel's portfolio in July. It also believed Wanda’s overall lack of "strategic clarity and predictability" sent signals of significant uncertainties that may lead to inadequate capacity to fulfill financial commitments.
Both rating agencies were wary of the risks in Dalian Wanda’s transitioning business model, as the giant offloaded the bulk of this hotel and theme park assets for 2.94 billion US dollars in July.
The buyers in the landmark property deal Guangzhou R&F Properties and Sunac Group have also been subject to negative action by all three rating agencies.
(CGTN)
