There is still no silver lining on the horizon for Dalian Wanda after a difficult 2017, with reports of a Standard & Poor credit downgrade coming after two big investors in the company’s film studio project pulled out and sold their stakes.

On Thursday S&P downgraded the credit rating of Dalian Wanda Commercial Properties from BBB -to BB and Hong Kong-listed Wanda Commercial Properties from BB+ to BB-. According to S&P’s definitions of its credit ratings, BB would mean that it sees Wanda as having its quality characteristics “outweighed by large uncertainties or major exposure to adverse conditions.”

According to the Financial Times, S&P directly referred to Wanda’s July sale of 63.2 billion yuan-worth (9.3 billion US dollars) of assets to Guangzhou R+F and Sunac as a reason for the downgrade, calling it an "abrupt decision to sell the bulk of its property development projects and its entire hotels' portfolio." S&P also cited Wanda’s lack of "strategic clarity and predictability" as another factor in their decision to downgrade.

Yet another setback for the company owned by China’s second richest man, Wang Jianlin, comes hot on the heels of reports that two Chinese investors in Wanda’s Legendary Entertainment had pulled out and sold their stake after the studio failed to make good on promises of a 15 percent return within 12 months.

Legendary Entertainment was successfully bought out by Wanda in 2016 for 3.5 billion US dollars – at the time the largest ever Chinese M&A of an American company. Under Wanda, Legendary released Zhang Yimou’s Great Wall, a big-budget critical flop which disappointed at Chinese and international box offices.

Bloomberg reported on Wednesday that two Chinese investors – Oceanwide Holdings and Zhejiang Huace Film and TV – had sold stakes with a combined value of 1.56 billion yuan (236 million US dollars) back to Wanda, as per their initial agreement with the conglomerate. Wanda had promised a 15 percent return to investors if it failed to bring Legendary public within 12 months, according to Hollywood Reporter.

With 12 months passing by, Wanda has been forced to buy back those stakes at a loss, after failing to list a planned merger between Legendary and its own Wanda Cinema Line. Wanda has come under greater scrutiny from Chinese authorities over its overseas acquisitions this year, halting one-billion-dollar plans to buy Dick Clark Productions and putting an end to the Legendary merger.

In 2015, Wanda reported that Legendary had posted losses of 560 million US dollars. This year the movie studio looked to assure that everything was business as usual in July when it became clear Wanda was coming under pressure over its overseas deals. Big budget movie franchises in production such as Pacific Rim and Jurassic Park are still on schedule, but they are now under even more pressure to perform at the box office. 

Legendary’s attempt to calm concerns about Wanda coincided with the Chinese property giant selling off 19.9 billion yuan-worth (2.94 billion US dollars) of hotel assets to Guangzhou R+F and 43.84 billion US dollars-worth of assets in 13 tourism projects to Sunac.

Wanda’s founder Wang Jianlin has been the subject of intense rumors amid increased reports that all was not well – in August the group was forced to deny that Wang had been detained or barred from leaving the country, threatening legal action at a time when stocks and shares in Wanda were plunging.

Since peaking on November 30, 2016, Wanda’s share price has plummeted by almost 44 percent, and this is not the first time that S&P has downgraded Wanda since then. In December 2016, Dalian Wanda Commercial Properties was brought down a notch from BBB to BBB-, and Hong Kong-listed Wanda Commercial Properties was also shifted down to BB+ from BBB-.

S&P at the time said the downgrade was because of deteriorating leverage which would "likely remain high over the next one to two years," as well as capital expenditure which was beyond expectations.