* Loans: Conglomerate returns to offshore market following regulatory scrutiny
By Yan Jiang
HONG KONG, Aug 24 (TRLPC) - Chinese conglomerate Dalian Wanda Group is looking to borrow up to US$800m in its first visit to the offshore loan market since it came under regulatory scrutiny nearly two years ago.
The Beijing-based property-to-entertainment group is seeking a three-year club loan for refinancing and working capital and has obtained approval from the National Development and Reform Commission, the top regulator with oversight of offshore debt fundraisings, for Chinese companies.
Wanda’s access to offshore funding has been restricted since mid-2016 when Chinese authorities cracked down on “irrational” overseas acquisitions and tightened capital controls to shore up the renminbi. Major domestic lenders were ordered to monitor their exposures to large acquisitive conglomerates, such as Wanda, Anbang Insurance Group, Fosun Group and HNA Group.
The resultant funding squeeze and downgrades to its credit ratings forced Wanda’s property arm, Dalian Wanda Commercial Properties, to pre-pay in full four loans totalling US$1.7bn by late April of this year.
The parent is timing its return to the offshore loan market at a potentially awkward moment when the escalating trade war between the US and China is putting downward pressure on the renminbi. This could raise the risk of another regulatory onslaught against capital outflows.
“Under the current circumstances, it will be hard for Wanda and many other Chinese companies to move money across the border,” said a Hong Kong-based banker. “That means they will be under heavy refinancing pressure” to repay maturing offshore debt.
Wanda has an outstanding US$800m three-year offshore club loan signed in October 2016, which pays an interest margin of 240bp over Libor. It also has US$600m senior notes issued via Wanda Properties Overseas which are due in November.
Wanda has sold US$18bn of assets over the past year, including one real estate project in London and two in Australia. Projects in the US are also on the block.
“Wanda will gradually clear up all interest-bearing debts offshore,” group founder and chairman Wang Jianlin said in January. “I shall shoulder the full responsibility to say that Wanda will not have any credit default.” PEER INDICATORS Other conglomerates which have attempted offshore fundraisings have had mixed results.
Fosun International, which owns majority stakes in French resorts company Club Med and English football club Wolverhampton Wanderers, among other overseas assets, managed to increase a three-year senior loan this month to US$600m from US$550m. The Fosun Industrial facility attracted 18 non-Chinese lenders – including six leads. Proceeds refinanced a US$800m one-year bridge loan that backed the purchase of a 74% stake in India’s Gland Pharma.
That loan was Fosun’s second borrowing in as many months. In May, Fosun International increased a three-year loan to US$743.27m-equivalent from an original target of US$500m. Of the 15 lenders participating, two were Chinese.
On the other hand, aviation-to-financial services conglomerate HNA Group is struggling to attract lenders for a HK$5bn (US$643m) four-year term loan. DBS Bank is the facility agent and has attracted Shanghai Commercial Bank to the transaction. Proceeds will refinance a bridge facility and fund development of a land parcel in Hong Kong’s Kowloon district. RISING BOND YIELDS Wanda’s offshore financing has been in the works for some time. Citing the company’s management, Fitch said in a report on June 8 that Wanda intended to “tap offshore capital markets from time to time via syndicated loans or bond issuance to maintain diverse funding options, even if it has disposed of a majority of its overseas projects”.
Late last year, it obtained approval from NDRC for a US$1.5bn offshore borrowing quota and eyed a bond offering, but rising interest rates quashed its hopes and the NDRC approval lapsed after six months.
Refinancing conditions for Chinese developers have worsened quickly both onshore and offshore, amid growing defaults this year by Chinese issuers, including state-owned enterprises.
That have pushed up bond yields. Logan Property Holdings (Ba3/BB−/BB−) last week priced a US$300m three-year non-call two bond at 7.75%. That was richer than the 7.5% yield Logan offered on a US$100m tap in May. The tap itself had paid a premium compared to the 7% yield on a US$300m 6.875% three-year non-call two bond priced in mid-April.
Wanda’s 4.875% November 2018 bond traded at a bid/ask range of 99.500–99.875 on Wednesday, indicating a yield of 5.348%, according to Tradeweb. (Reporting By Yan Jiang; Editing by Prakash Chakravarti and Vincent Baby)