Hong Kong Stock Exchange

UBS backed away from US$4.4b Wanda privatisation amid concerns over credit risk profile, FT reports

PUBLISHED : Sunday, 09 October, 2016, 10:01pm
UPDATED : Sunday, 09 October, 2016, 10:24pm

Lingering concerns over credit risk prompted UBS to pull out as financial adviser weeks ago to the US$4.4 billion deal that took Dalian Wanda Commercial Properties private, a transaction that the Swiss financial services giant helped initiate, according to a media report.

The property conglomerate, controlled by Wang Jianlin, put its plan back on track with China International Capital Corp, which single-handedly shepherded Hong Kong’s biggest privatisation deal.

Shareholders approved Wang’s share buy-back offer on August 15, which has paved the way for the relocation of the company’s listing from Hong Kong to mainland China.

Citing a senior Wanda official, the Financial Times reported on Sunday that UBS “had become uncomfortable with that deal’s credit risk profile” and backed out of the transaction it had originally proposed ahead of the offer in May.

“That’s why foreign banks are really losing ground on this front,” the FT quoted the Wanda official as saying.

There were no comments from either CICC or UBS.

Under rules in Hong Kong, banks are required to be satisfied with the sources and availability of funds when offers were made, the report said, adding that Wang raised funds from private investors for the share buy-back.

Wanda’s shares were withdrawn from the Hong Kong stock exchange last month.

“[The] privatisation process is very complicated,” Carol Wu, the head of China and Hong Kong research at DBS Vickers, said in August.

Wu pointed out that the way red chips were structured in Hong Kong had become a hurdle for these Chinese companies to relocate their share listings to the mainland.

Wanda had raised about HK$28.8 billion during its initial public offering in Hong Kong in December 2014.

The company is one of the world’s biggest commercial property developers and operates the largest number of shopping malls with the highest rental revenue in mainland China.

At the end of June, it had 142 Wanda Plaza malls and 79 hotels in operation, which generated an estimated recurring revenue of 25 billion yuan (HK$29.05 billion) this year.

Credit rating agency Fitch said last month that Wanda’s fast-paced land acquisitions for new Wanda Plaza projects in the first half of this year would weigh on its financial profile during the next two years.