Dalian Wanda Group Co. is in talks with major Chinese banks on a loan relief plan that could allow it to extend principal repayments for some onshore borrowings as the conglomerate faces a liquidity challenge, according to people familiar with the matter.
Under the plan, the property giant’s headquarters is seeking to refinance all onshore loans due this year without having to repay the principals, said the people, asking not to be identified as the matter is private. Industrial and Commercial Bank of China Ltd. is among the creditors Wanda talked with since early May, the people said.
Developers are allowed to seek “reasonable” extension of existing fundraising for as long as one year, based on a 16-point rescue package China rolled out in November. Banks can also avoid downgrading those debt to non-performing.
Billionaire Wang Jianlin’s group is trying to avert a potent liquidity crunch that could be triggered if it fails to list a mall operator unit by the end of this year. As part of an earlier agreement with investors, Wanda may be forced to repurchase about 30 billion yuan ($4.3 billion) of equity if the initial public offering doesn’t happen by December.
Wanda’s discussions are at an early stage and it’s unclear which units, if any, might obtain such arrangements from their banks, according to the people. The company also requested subsidiaries to apply for additional new credit lines from banks, one of the people said.
Representatives of Dalian Wanda and ICBC in Beijing didn’t immediately respond to requests for comment.
Chinese authorities have issued a clutch of measures since late last year to bolster the embattled sector that accounts for about a quarter of the nation’s economy.
The plan to extend principal payments, if approved by banks, could ease Dalian Wanda’s financing burden. The government is easing its stance after the industry plunged into a crisis that sparked mortgage boycotts across the nation.
Chinese banks have been encouraged by regulators to agree to similar requests in recent years to support private companies. In 2020, the nation’s lenders postponed principal repayments on 1.44 trillion yuan in loans for almost 800,000 small businesses to provide relief during the Covid outbreak.
Such support usually focuses on small businesses facing short-term liquidity stress, and there’s been debate over whether it should be expanded to large companies.
IPO Delay
For Wanda, the mall unit’s IPO is potentially linked to other obligations. Three Wanda’s offshore term loans give lenders the option to demand early full repayment if a listing isn’t completed by May, Debtwire reported last month. Later, the publication reported that Wanda told some lenders it received sufficient consent from banks to hold off any repayment, and that the firm is seeking to delay the IPO trigger date to Nov. 30.
Investors have been spooked after the mall unit’s listing application lapsed for a third time in late April. Two of its dollar bonds were trading below 60 cents on the dollar on Monday, a level typically considered distressed.
The company is facing a similar risk China Evergrande Group encountered in 2020. Billionaire Hui Ka Yan skirted the crisis at that time by striking a deal with investors to waive their right to force a $13 billion repayment by the company.
Evergrande was later labeled a defaulter in December 2021 after it missed payments on bonds. Several others followed suit, including Kaisa Group Holdings Ltd. and Sunac China Holdings Ltd. The defaults crushed what was once the most active and lucrative high-yield bond market in the world.