Bloomberg
China tycoon who lost $ 32 billion in attempts to rescue his empire
(Bloomberg) – Wang Jianlin used to be the richest person in Asia, busy expanding his Dalian Wanda Group Co. by acquiring trophy assets abroad, all with the help of easy credit. Now, the 66-year-old man doesn’t even rank in China’s top 30 richest people, having lost about $ 32 billion of his personal fortune in less than six years – the maximum for any tycoon at that time. While Wang seeks to cut the group’s total debt of 362 billion yuan ($ 56 billion) and turn his entertainment empire into property, he is facing skeptical bond investors. bonds were among the first to fall earlier this month, when a broader fall hit the Asian credit market. The sale, partly triggered by concerns about impending payments, came as a warning from investors eager to see how Wang will be able to keep his group away from the debt risks that have convulsed peers like HNA Group Co., China Evergrande Group and Anbang Group Holdings Co. “The group’s liquidity is an important consideration for investors,” said Dan Wang, an analyst at Bloomberg Intelligence. A Wanda representative did not respond to requests for comment on debt risks. Wang, who once bought the Spanish football club Atlético de Madrid as part of the overbought and aspired to compete with the Walt Disney Co., is still getting rid of some of them active. The most recent came last week, when Wanda gave up control of AMC Entertainment Holdings Inc., with its share now representing less than 10% of the world’s largest cinema chain. Despite the divestments after a government crackdown on credit-fueled expansion, Wanda The group’s debt in June skyrocketed to its highest level since 2017. The pandemic has only added to the woes, affecting its cinemas, shopping malls, theme parks, hotels and sporting events. As China stabilizes its economy after containing the virus, the reopening of cinemas and shopping malls is giving Wang the time to stabilize his ship. He is advancing with a strategy he has advocated for years, called the “asset light” model, to reduce leverage. This means spending less on reducing land purchases. Dalian Wanda Commercial Management Group Co., one of the world’s largest mall operators that accounts for almost half of the group’s revenue, will stop buying land from this year and license its brand to partners, said company president Xiao Guangrui , to mainland media in September. No alternative “Wanda had no real alternative to his new light asset strategy,” said Brock Silvers, investment director at Kaiyuan Capital in Hong Kong, which has no Wanda shares or bonds. “The company’s debts were unsustainable.” The effect of the pandemic in Wanda was impressive. Film producer and operator Wanda Film Holding Co. said it may have accumulated a record net loss of $ 1 billion last year. Despite becoming a favorite in the recent stock rally fueled by Reddit, AMC has repeatedly warned that it was on the verge of insolvency and reported its worst annual loss ever, as revenue plummeted 77%. Wanda Commercial Management said sales and profit fell by almost 50% in the first nine months of 2020. Even if Wanda’s business overcomes the global health crisis, there is no certainty that creditors will be kind after developments in other conglomerates. indebted Chinese, such as HNA, Evergrande and recently at Suning Appliance Group Co. In an offering circular in September, Wanda told investors that the group’s level of indebtedness could “adversely affect” some operations. The conglomerate also faces stricter credit rules in the real estate sector, as Chinese regulators seek to reduce financial risk. Wanda and its units raised about 48.2 billion yuan in local and offshore debt last year, most of it since 2016. Part of it was used to pay back the oldest bonds, as the group needs to refinance or reimburse about 32 billion yuan in domestic bonds due in 2021. While the group’s dollar bonds have almost erased its losses since the fall earlier this month – its worst week in nearly a year – credit traders have cited concerns about the maturity of the group’s local bonds and a sale of some of its notes on land. In his heyday, Wang – a former soldier of the People’s Liberation Army – traveled on his Gulfstream G550 private plane, paying high prices for assets, including a luxury property in Beverly Hills, the Hollywood studio Legendary Entertainment and One Nine Elms in London, one of the tallest residential towers in Europe. His fortune plummeted when China began to crack down on such expansion and capital outflows. His wealth shrank to about $ 14 billion from a peak of $ 46 billion in 2015, when he was crowned the richest person in Asia, according to the Bloomberg Billionaires Index. “Wanda has gained surprisingly little from the period of unrestricted investment opportunity,” said Pratas of Kaiyuan Capital. . “The company has since been quicker to dispose of assets than other conglomerates, but it still has a lot to do.” The light asset strategy would help generate sustainable recurring rental revenue for Wanda Commercial Management, the group’s “dairy cow”, said Chloe He, director of corporate rating at Fitch Ratings. It can also prevent the company from committing large capital expenditures and incurring a lot of debt, she added. “This is going to be very useful for them to delever in the future, as long as they don’t invest in anything else,” he said. . For more articles like this, visit us at bloomberg.comSubscribe now to stay on top of the most trusted business news source. © 2021 Bloomberg LP