Will Anbang sell its overseas assets including the Waldorf Astoria New York hotel?

Anbang says it ‘has not received an order’ in response to a report of the government ordering the insurer to dispose of its overseas assets

PUBLISHED : Monday, 31 July, 2017, 7:03pm
UPDATED : Monday, 31 July, 2017, 11:12pm

China’s insurance conglomerate Anbang said it had no current plans to sell its overseas assets including New York’s landmark Waldorf Astoria hotel, refuting a media report that authorities had ordered the company to dispose of its assets and repatriate the proceeds to the mainland.

Anbang said it “has not received an order like that” in a reply to the South China Morning Post.

“Anbang at present has no plans to sell its overseas assets,” the company said in a WeChat message. “Currently, Anbang’s various businesses and operations are all normal, and the company has ample cash and sufficient solvency capabilities.”

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According to a Bloomberg report on Monday afternoon that cited unnamed sources familiar with the matter, Chinese authorities have asked Anbang to sell its overseas assets and bring the proceeds back to China.

Beijing has since June, further strengthened its crackdown on companies moving their assets overseas and intensified its scrutiny to remove financial risks ahead of the crucial party leadership reshuffle this autumn.

It has also been seven weeks since Anbang said its chairman Wu Xiaohui could not perform his duty “for personal reasons”, and had delegated his authority to other executives. Wu has reportedly been detained for investigation since June.

The thrust of the investigation or Wu’s suspected wrongdoings remain unknown so far.

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In the last few years, Wu’s Anbang has come across as one of most powerful and well-connected players on the domestic and overseas capital markets. It made global headlines in 2014, by acquiring the Waldorf Astoria hotel for US$1.95 billion.

It was involved in a high-profile bidding war worth US$14 billion for Starwood Hotels last year, and has held talks with Jared Kushner, the son-in-law of US President Donald Trump, about buying into a skyscraper project in Manhattan.

But Wu’s empire has met more setbacks in the recent months, after two major acquisition deals, including the Kushner deal, were called off in the US due to regulatory hurdles at home and abroad.

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In early June, China’s banking regulator ordered banks to run scrutiny into top overseas acquirers, including Anbang, Fosun International, HNA Group, Dalian Wanda Group, and the buyer of the AC Milan soccer club.

Analysts said the authorities were keen on curbing financial risks stemming from large-scale acquisitions largely based on loans provided by domestic banks.

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“Beijing is clearly pushing hyper-extended corporates to buttress balance sheets,” said Brock Silvers, the chief executive of Kaiyuan Capital, an investment banking advisory in Shanghai.

“Wanda dutifully adhered to that guidance when it agreed to divest its theme park and hotel portfolio.

Beijing is clearly pushing hyper-extended corporates to buttress balance sheets
Brock Silvers, Kaiyuan Capital

Wanda is highly unlikely to be the only company to take such action, and the market should look for Anbang (and all other major outbound M&A players) to quickly do the same.”

Silvers said the extent of any Anbang divestment could indicate Beijing’s level of discomfort with its debt load and fundraising practices.

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With Anbang’s offshore assets seemingly illiquid and the associated legal and political risks, coupled with the company being seen as a forced seller, the overseas market for the assets could prove to be thin and difficult, he said.

“Unless Beijing sends in a white knight, Anbang’s issues most likely can’t be quickly resolved.”

On July 10, Wanda Group announced its decision to offload a portfolio of hotels and theme parks for US$9.3 billion in cash to repay debts.

In a letter published on Wechat on Saturday, Fosun’s chairman Guo Guangchang said the purpose for Fosun to “go out” was that they could “return home better”, by consolidating the global resources for better development in China.