Fitch lowers China Dalian, Wanda Properties

Fitch Ratings said it downgraded China Dalian Wanda Commercial Properties Co. Ltd.'s foreign-currency long-term issuer default rating, senior unsecured rating and ratings on its outstanding senior notes to BBB from BBB+.

The outlook is stable.

Fitch also said it downgraded all of the outstanding bonds issued by wholly owned subsidiaries Wanda Properties International Co. Ltd. and Wanda Properties Overseas Ltd. to BBB from BBB+.

The downgrades reflect an expectation that the company’s contracted sales in 2016 and 2017 will fall to a level not sufficient to support its ongoing capital expenditure plans and development expenditure, the agency said.

This will require additional debt, which will keep Wanda's recurring interest coverage to less than 1x in 2016, despite rapidly rising rental income of more than 30% per year, S&P said.

The stable outlook reflects a belief that Wanda's financial profile will start to improve by the end of 2017 as the company becomes an investment-property company, the agency said, and shifts its business model to rely on third-party capital to fund the majority of its future Wanda malls expansion.

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