Chinese concern on bond market

Nearly two months after reports about Chinese regulators’ scrutiny of the country’s top dealmakers, the concerns have left a mark in the local bond market, where one of those companies is facing yields double the national average.

Yields on onshore securities without put or call options of Dalian Wanda Commercial Properties, which has an AAA rating onshore, are above 9%, according to valuations compiled by Chinabond.

That compares with the average 4.55% yield on top-rated notes due in three years from all corporate borrowers in the country. It’s also higher than the 5.8% average yield on three-year notes with AA- ratings, considered junk in China.

Sources said in June that the Chinese banking regulator asked some banks to provide information on overseas loans made to top dealmakers including Dalian Wanda Group, the parent of the property subsidiary.

Wanda’s disposal of tourism and hotel assets to two rival Chinese developers last month has added to investors’ confusion.

“Chinese investors are concerned about non- operational risks,” said Qin Han, chief bond analyst at Guotai Junan Securities in Shanghai.

“Uncertainties about the risks may stay for some time. But it doesn’t mean any particular problem with the company’s credit fundamental, he said. Wanda Group declined to comment.

The yield on Wanda Commercial’s April 2021 notes has climbed 235 basis points to 9.36% since June 22, the day of the news about the banking regulator scrutiny.

The rate on its bond due in March 2021 has risen 234 basis points to 9.34%. That compares with no change in the average yield of three-year AAA corporate notes in the period.

Wanda Commercial has taken a break from raising money in the onshore and offshore bond market, set for its first quarterly hiatus since June 2015.

The company delisted from the Hong Kong stock exchange in September, with the aim of eventually re-listing in China as billionaire Wang Jianlin seeks higher valuation in the mainland.

“What worries the investors is the unspoken reasons behind Wanda’s disposals. The company also lacks transparency after the delisting from Hong Kong exchange,” said Chuanyi Zhou, credit analyst at Lucror Analytics.

Wanda Group agreed in July to sell a 91% stake in a collection of cultural and tourism projects across the nation to Sunac China Holdings for 43.8bn yuan (€5.57bn).

Bloomberg

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