He was once China’s richest person. Now he is fighting to save his empire

Wanda didn’t respond to requests for comment. Wang acknowledged some difficulties at his company during an internal meeting in April, reiterating that Wanda can overcome its challenges, people familiar said at the time.

IPO lapse

Once Asia’s richest person, Wang has been on the defensive ever since China escalated crackdowns on its tycoons during Xi’s reign.

The big state banks started limiting funding to Wanda six years ago, prompting the company — along with HNA Group Co. and Anbang Insurance — to scale back its global ambitions. Wanda, at one time the world’s largest cinema operator, almost completely exited its investment two years ago in US cinema chain AMC Entertainment, which it had bought in 2012 for $US2.6 billion.

Wang has acted quickly before to save his conglomerate. Around five years ago, he managed to save Wanda from bankruptcy by selling his hotels to Guangzhou R&F Properties Co. and tourism and theme-park projects to Sunac China Holdings in deals that brought in about 69 billion yuan.

When COVID hit, Wang saw his wealth shrink like his fellow tycoons. He coped by deploying an asset-light strategy to cut debt, retreat from overseas expansions and disposing a stake in Legendary Entertainment, the studio behind Dune.

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That hasn’t ended his troubles. China’s securities watchdog sent a letter to Wanda’s mall unit in March, inquiring about the delayed share sale of Zhuhai Wanda Commercial Management. The unit manages more than 400 shopping malls.

Regulators were concerned about the company’s finances as it faces repurchase obligations of about 30 billion yuan in equity from pre-IPO investors, if it fails to list by the end of this year.

By early May, the company’s listing application on the Hong Kong stock exchange had lapsed for a third time, turning Wanda into a source of anxiety among investors.

Its bond prices tanked. Wanda’s bond due in July this year are now trading at 86 cents on the dollar. The shopping mall unit has 6 billion yuan in four onshore bonds that would either mature or face investors’ early redemption request by the end of November.

Wanda has been trying to shore up its liquidity by exploring the sales of as many as 20 shopping malls and its digital payments license, Bloomberg reported in May. It’s also in talks with major Chinese banks on a loan relief plan, people familiar have said.

Critical juncture

China’s property sector remains fragile despite a 16-point plan of support unveiled by the government in November last year.

Sales in the real estate sector have fizzled following a brief rebound early this year. Distress is spreading from private developers to state-owned ones, and perhaps more worryingly, from smaller cities to top-tier ones, where “secondary markets are suffering from a glut of eager sellers despite plummeting sales,” Nomura analysts led by Lu Ting wrote.

A mountain of developer debt — equal to about 12 per cent of China’s GDP — is at risk of default.

That’s why the government is planning to issue an additional basket of measures to aid the real estate sector, people familiar said this month.

The end of June will be a critical juncture when state-owned lenders typically assess loan risks and rollover requests, the people said. Wanda is in talks with banks including Industrial & Commercial Bank of China Ltd. on a plan that may allow it to extend principal repayments for some onshore borrowings, people familiar have said.

Under the plan, the property giant is seeking to refinance all onshore loans due this year without having to repay the principal, the people added.

Wang is also personally negotiating with large investors, seeking an extension on repayment if the company fails to list its mall unit in time, people familiar said. The investors include the Zhuhai State-owned Assets Supervision and Administration Commission.

“The troubled company still faces an untenable future without significant changes to both its business model and balance sheet.”

Brock Silvers, managing director at private equity firm Kaiyuan Capital

Key impediments to the company’s listing include a lack of investor appetite and reservations among regulators at China’s securities watchdog, the people said.

“When and whether Zhuhai Wanda would obtain IPO approval is now more uncertain,” S&P Global Ratings analysts Iris Cheng and Esther Liu said in a June 5 report that downgraded Wanda Commercial to a BB rating. “Dalian Wanda Group’s financing channels could further narrow if no positive feedback is received” on the listing.

The China Securities Regulatory Commission asked Zhuhai Wanda to provide supplementary materials for its overseas listing plan, the government said in a statement on June 2. It asked for documents on internal control and operation, connected transactions, and fund-raising management.

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The company can’t list in Hong Kong until it gets a green light from the CSRC.

This month, a Shanghai court froze a 1.98 billion yuan stake that Dalian Wanda held in its shopping mall unit due to financial disputes between the company and its partner in a Changchun project. Wanda said it is seeking to protect its rights through legal action.

All that means that time is ticking for Wang. Meanwhile, the tycoon’s $US98 million aid to his friend Wu Po Sum at Central China Real Estate is still in the works. Fewer than 5 projects have been taken over by Wanda, and the rest are under due diligence, the people said.

“The troubled company still faces an untenable future without significant changes to both its business model and balance sheet,” said Brock Silvers, managing director at private equity firm Kaiyuan Capital Ltd. “Investors have no reason to think those changes are imminent.”

Bloomberg

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