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Chinese conglomerate Dalian Wanda is planning to sell a majority stake in Wanda’s Hong Kong-listed arm to a privately held holding company wholly owned by the group’s chairman Wang Jianlin.
The proposed sale is part of a reorganisation of Dalian Wanda led by Mr Wang that puts more of the group’s core assets directly under his supervision, while addressing cash flow problems.
The equity sale is essentially a cash injection, of about $460m, from the chairman into the overseas arm of Dalian Wanda Commercial Property.
“This transaction is a boost for their [Dalian Wanda Commercial Property’s] liquidity. We’re factoring that as a positive for resolving its offshore refinancing issues,” said Dennis Lee, an associate director at S&P Global.
The transaction involves the sale of about 3bn shares — a 65.04 per cent stake — in listed Wanda Hotel Development to Wanda Investment Holding Company, wholly owned by Mr Wang, for HK$1.20 a share.
Shares in Wanda Hotel Development rose 16 per cent in Hong Kong on Monday in reaction to the announcement.
Dalian Wanda’s group debt is unclear as its assets are held across an opaque web of private subsidiaries majority owned by Mr Wang and his family.
However, DWCP alone has about $1.7bn to $1.8bn in outstanding syndicated loans, according to S&P Global.
Offshore groups wholly or partly owned by Dalian Wanda have $10.7bn in long-term debt outstanding, according to S&P Global Market Intelligence
In September, S&P Global downgraded DWCP to a junk rating over concerns about Dalian Wanda Group’s outlook and access to funding. That downgrade would have triggered repayment on some of the loans, said Mr Lee.
Dalian Wanda was one of the four Chinese companies that regulators began probing this year for systemic financial risks. All four had embarked on aggressive dealmaking sprees overseas and like other acquisitive companies have encountered troubles fundraising as a result.
The group’s notable offshore deals include a $3.5bn purchase of Legendary Entertainment Group, in January 2016, the $2.6bn deal for AMC Entertainment Holdings, in May 2012, and a $1.2bn acquisition of Carmike Cinemas, in March 2016.
Monday’s announcement may also be part of preparations for relisting DWCP on the Hong Kong stock exchange, analysts said. When Mr Wang privatised DWCP last year, he promised to relist it by 2018 or pay individual investors who helped fund the privatisation a 12 per cent annual return.
“No one knows 100 per cent but my guess is this is a tidying up process driven by need to reduce gearing in [DWCP] and perhaps take on problem within his wholly owned part of the business before relisting, as I don’t know quite where [DWCP] have got to relisting,” Nigel Stevenson, an analyst at Hong Kong consultancy GMT Research.