Wanda Group raises funds from Beijing Investment stake sale as US$400 million bond matures

China Ruyi Holdings agreed to buy a 49 per cent stake in Beijing Wanda Investment through its unit Shanghai Ruyi Television, according to an exchange filing on Sunday
A US$400 million bond of Wanda Commercial Management Group, an affiliate of Wanda Group, was due on Sunday

China property

Zhang Shidongin Shanghai

Published: 11:32am, 24 Jul 2023

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Dalian Wanda Group, China’s biggest commercial property developer, may avert a bond default after it agreed to sell a stake in a wholly owned subsidiary to raise 2.26 billion yuan (US$314.4 million), its third stake disposal in its units this month that underscores its liquidity stress amid mounting debt-servicing pressure.

Tencent Holdings-backed China Ruyi Holdings will buy a 49 per cent stake in Beijing Wanda Investment through its unit Shanghai Ruyi Television Production, according to a filing to the Hong Kong stock exchange on Sunday. The two sides signed the stake-transfer deal on Thursday, it said.

The proceeds from the stake sale in Beijing Wanda Investment will be used to service a US$400 million bond of affiliate Wanda Commercial Management Group that was due on Sunday, Reuters and Chinese media The Paper reported, citing unidentified sources.

The stake sale may ease the liquidity crunch facing Wanda Group after S&P Global and Fitch Ratings downgraded their ratings on Wanda Commercial Management this month, questioning its ability to repay the maturing debt. A liquidity crunch has been piling up in Chinese property developers as a rebound in home sales sputters and top policymakers refrain from significantly loosening the property market, with the focus shifting to pursuing high-quality growth.

After the stake transfer, Wanda Group will control 49.8 per cent of Beijing Wanda Investment while founder Wang Jianlin still owns 1.2 per cent.

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It is the third time that billionaire Wang has offloaded assets within Wanda’s subsidiaries this month. Beijing Wanda Investment sold a combined 357 million shares, or a 16.4 per cent stake, in Shenzhen-listed Wanda Film Holding in two separate deals in July. It currently has a 20 per cent stake in the cinema operator.

Hong Kong-listed shares of China Ruyi, a movie production and online streaming company, fell 2.6 per cent to HK$2.57 on Monday after earlier rising as much as 8.4 per cent on Monday, outpacing a 2.1 per cent decline in the Hang Seng Index.

Wanda Commercial’s yuan bond due September 2025 surged by as much as 14 per cent to 83 yuan, recouping some of the 17 per cent loss last week.

“Shanghai Ruyi currently has no intention to appoint a director to Beijing [Wanda] Investment and has no plan to participate in its daily operation and management,” China Ruyi said in the statement. “Beijing [Wanda] Investment will not be a subsidiary of the company and its financial results will not be consolidated into the company’s consolidated financial statements.”

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China Ruyi is 25 per cent owned by Water Lily Investment, a unit of Tencent. The company is a live-streaming operator that offers subscription-only paid content. It is involved in the production and distribution of some of China’s highest-grossing films such as Hi, Mom and Detective Chinatown, according to its website.

The deal will give China Ruyi indirect control of 9.8 per cent of Wanda Film through Beijing Wanda Investment, Wanda Film said in an exchange statement on Monday. Shares of Wanda Film slid 3.5 per cent to 14.03 yuan in Shenzhen, paring the gain to 0.2 per cent this year.

Investors’ sentiment towards Chinese developers has worsened recently as home sales have resumed declines amid a dim growth outlook and shrinking demand in smaller cities, further squeezing their liquidity after Beijing’s tough three redline policy of curbing leverage in the industry.

Country Garden Holdings’ shares tumbled 8.7 per cent to HK$1.26 in Hong Kong on Monday after JPMorgan Chase lowered the recommendation of the developer to underweight from neutral, citing default risks and further weakening of home sales. Its property-management unit Country Garden Services Holdings slumped 18 per cent to HK$7.41 after the US bank downgraded the stock’s rating to underweight from overweight.

About 50 Chinese developers had defaulted on some US$100 billion worth of offshore bonds over the past two years, according to a report by JPMorgan Chase in December, with 39 of them seeking restructuring with creditors for US$117 billion of stressed debt.