Fitch Ratings has upgraded the Long-Term Foreign-Currency Issuer Default Rating (IDR) on
Fitch has also upgraded the rating on the US dollar notes guaranteed by Wanda HK and issued by Wanda Commercial's subsidiaries to 'CC', from 'C'. The Recovery Rating is 'RR4'.
The upgrades follow Wanda Commercial's repayment of a coupon on its
Key Rating Drivers
Bond Coupon Paid: Wanda Commercial missed the coupon payment due on
Potential Restrictions on Cash: Wanda Commercial previously reported
Wanda Commercial also holds
Bond Repayment Uncertainty: Wanda Commercial has a
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
Wanda Commercial's and Wanda HK's ratings are driven by the high level of credit risks related to the repayment of its upcoming capital-market maturities.
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 This is more conservative than the 80% in Fitch's criteria, as the ending balance is outdated.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
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Greater clarity on the repayment plans for capital-market maturities for the rest of 2023 and 1H24
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Failure to repay capital-market maturities or bond interest falling due in 2023
Any announcement of a default or default-like process
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
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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