(Yicai Global) Dec. 13 -- Dalian Wanda Commercial Properties Co. had its long-term credit rating cut one level by Standard & Poor's due to concerns over the Chinese commercial property developer's leverage.
Wanda Commercial was lowered to BBB- from BBB, with a negative outlook, the international credit ratings agency said in a statement today. S&P also cut the long-term rating on Wanda Commercial Properties Hong Kong Co., Wanda Commercial's key offshore investment holding company and financial platform, to BB+ from BBB-, also with a negative outlook.
"We downgraded Wanda Commercial because its leverage has deteriorated and will likely remain high over the next one to two years," S&P Global Ratings credit analyst Matthew Kong wrote in the statement. "The company's capital expenditure, including expenses for land acquisitions, construction, and new investments, exceed our previous expectations."
Since this year, Wang Jianlin, founder of Dalian Wanda Group and China's richest man, has started to transform the company into a more asset-light business. The group has invested heavily in entertainment and internet financing. The company also has an ambitious pipeline of opening about 50 new malls each year, and the degree to which it would self-fund these projects is uncertain.
"We believe Wanda Commercial's asset-light business transition carries a high degree of uncertainty and execution challenges," S&P's Kong wrote.
Funding is not the only problem Wanda Commercial faces. S&P raised concern about its mainland China listing plans.
On Sept. 20, the company delisted from the Hong Kong Stock Exchange where it had traded as HKG:3699 for just 15 months. Wang Jianlin has said it would seek a Shanghai initial public offering or a backdoor listing after exiting Hong Kong. A Shanghai IPO could take two to three years. A backdoor listing, or reverse merger, would take more than a year.
"We could lower the rating on Wanda Commercial if the company does not relist on a mainland stock exchange within the next 18-24 months," S&P said. "Its governance standards have weakened and the increase in business and financial integration with Wanda Group have weakened its credit profile."