China blocks Dalian Wanda from completing overseas deals

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Chinese regulators have ordered the nation’s big banks to put the brakes on loans to Dalian Wanda Group, the giant property and entertainment company owned by billionaire Wang Jianlin.

Chinese banking regulators met with executives at the country’s big state-owned lenders June 20 and advised them that six of Wanda’s foreign acquisitions, including Hollywood producer Legendary Entertainment, were subject to government capital restrictions enacted last year, according to a document from one of the participating banks that was reviewed by The Wall Street Journal.

The document likely refers to Wanda deals dating back about five years in the US and Europe, according to a person familiar with the matter.

They include US theatre chains AMC Entertainment Holdings Inc. and Carmike Cinemas, UK yacht maker Sunseeker International, Legendary Entertainment and European theatre operators Odeon & UCI Cinemas Group and Nordic Cinema Group.

Four of those deals closed between 2012 and 2016, and the two that haven’t — Odeon and Nordic — are being acquired through Wanda’s AMC unit in the US, which doesn’t appear to fall under China’s regulatory jurisdiction, the person said.

The State Council, China’s cabinet, put in place rules restricting outbound Chinese investment in late November, in a bid to prevent money from leaving the country as accelerated outflows put enormous pressure on the Chinese yuan. As part of the rules, Chinese companies are discouraged from making overseas deals related to real estate and entertainment.

Although four of the deals have already closed, the action would appear to block Wanda from getting new financing in connection with them from Chinese banks. In addition, the actions clouds financing for the two deals yet to close.

In addition, the government is preventing the company from using funds parked in the mainland to further finance any of these deals. Wanda is also banned from injecting any of these foreign assets into its listed company in China.

The document appears to shed light on Dalian Wanda’s surprise decision last week to sell most of its theme parks and hotels to developer Sunac China Holdings Ltd. for $US9.28bn.

Regulatory filings showed that Wanda will take out a three-year bank loan of $US4.35bn and lend the money to Sunac. Sunac will use the borrowed funds to repay Wanda and gain ownership of Wanda’s theme-park business, according to the documents filed by Sunac.

In selling off its prized hotel and theme-park assets, Wanda is paring a heavy debt load that has attracted the scrutiny of China’s banking regulator, which last month asked lenders to review loans to big overseas deal makers, including Wanda.

Wanda, controlled by billionaire Wang Jianlin, started as a property developer but moved into entertainment to diversify and expand its holdings. It owns the world’s largest cinema chain, AMC Entertainment, as well Legendary Entertainment, a Hollywood film producer and financier.

Wanda’s chairman, Mr. Wang, said the company will use proceeds from the sale to trim debt at its commercial-property unit, Dalian Wanda Commercial Properties Co., which is seeking a listing on a Chinese stock exchange but has yet to receive approval.

A unit of Dalian Wanda also acquired Australian cinema chain Hoyts Group in 2015.

By LINGLING WEI, WAYNE MA
Dow Jones Newswires

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