by Claire Jim

HONG KONG (Reuters) – Markets are closely watching whether a Dalian Wanda Group unit will meet a repayment deadline for $400 million worth of bonds as early as next week, as a failure would hit market confidence already weak in China’s property sector.

How much debt does Dalian Wanda have?

Dalian Wanda Group, owned by Wang Jianlin, China’s richest man, is the country’s largest commercial property developer, managing a number of shopping malls, offices and hotels across the country.

While there is little transparency on financial performance at the group level, its flagship asset services arm, Dalian Wanda Commercial Management, reported total liabilities of 302 billion yuan ($42.10 billion) as of September 30, 2022, while total assets stood at 598 billion yuan.

According to Moody’s (NYSE: ), Wanda Commercial has approximately 6.7 billion yuan of onshore bonds maturing and callable through June 2024, and $1 billion of offshore bonds coming due during this period.

Its debt pile is small compared to other Chinese residential property developers, many of which are set to default by mid-2021 amid the credit crunch.

But the market is also worried about Dalian Wanda’s other commitments, such as a share repurchase agreement worth about 40 billion yuan, if the unit’s Zhuhai Wanda fails to complete an initial public offering in Hong Kong later this year.

What’s next for Dalian Wanda?

Wanda Commercial’s $400 million bond is due on Sunday, but because it is not a business day, the payment date will be delayed until Monday.

The company told some creditors on Thursday that it expected to complete asset disposals and use the proceeds for Sunday’s repayments, marking a change from comments earlier this week that it still had a shortfall of $200 million, Bloomberg News reported.

If Wanda Commercial manages to make this repayment, the next deadline will be 3.5 billion yuan of onshore bonds on July 29. The next debt maturity offshore is in January 2024 for a $600 million bond.

What is the significance if there is a default?

Analysts said repayment problems at Wanda are troubling investors as it was one of the few private developers that survived the property meltdown during the last three years. It also managed to issue two bond tranches earlier this year in rare market issuances.

Sandra Chow, co-head of Asia-Pacific research at CreditSites, said, “This comes at the same time as negative news on several other developers. This has made investors even more nervous about the region and raised fears about who could be the next developer.”

“The extreme volatility in Dalian Wanda’s bond prices shows how fearful and emotional the market is at the moment.”

Investors are keeping a close eye on other names as well, saying defaults by Country Garden and Sino-Ocean Group, whose bonds plunged this week, could deal an even bigger blow as the former is one of the top market players and the latter is a state-backed firm.

What have regulators done to help stabilize the sector?

Top policy makers have been trying to boost liquidity and domestic demand in the asset sector, a key pillar of China’s economy, through a series of supportive measures since the debt crisis began in mid-2021.

However, the macroeconomic data so far and the ongoing defaults suggest that the troubled sector is still far from stabilised.

Analysts said a holistic package of policies is needed to arrest the market from further deterioration.

($1 = 7.1730 renminbi)