July 20, 2017 / 1:34 AM / 7 months ago

Fast and furious: Wanda restructures $9 billion deal under pressure

HONG KONG/BEIJING (Reuters) - Dalian Wanda Group’s abrupt reworking of a $9 billion property sale was messy until minutes before a high-profile announcement, as all sides scrambled to simplify payment - underscoring Beijing’s concerns over creative lending and ambitious deals.

Wanda, led by one of China’s richest men, Wang Jianlin, announced on July 10 it would sell hotel and theme park assets to rival Sunac China.

But shortly after, it approached Guangzhou R&F Properties about taking on some of the assets to reduce the complexity of the deal and speed up full payment, two sources familiar with the matter said.

It got what it wanted - although talks were so frenetic ahead of Wednesday’s news conference that it was touch-and-go about whether a deal would be done, said one of the sources who had direct knowledge of the deliberations.

Disagreements were such that the R&F name was temporarily taken off a board at the venue for the news conference which was also delayed by an hour, said the source, who declined to be identified due to the sensitivity of the matter.

Wang told reporters the delay was due to printer problem and that concerns about “terrible quarrels” were just rumors.

Representatives for Wanda declined to comment on the details of the talks.

The deal, which represents a sharp scaling back of Wang’s theme park ambitions, comes amid difficult times for Wanda.

China regulators have told banks to stop providing funding for several of Dalian Wanda Group’s overseas acquisitions as Beijing looks to curb the conglomerate’s offshore buying spree, sources familiar with the matter said on Monday.

Chairman of Dalian Wanda Group Wang Jianlin, Chairman of Sunac China Holdings Ltd. Sun Hongbin and Chairman of R&F Properties Li Silian attend a strategic cooperation signing ceremony in Beijing, China July 19, 2017. REUTERS/Jason Lee

Prospects for relisting its commercial property unit in Shanghai by September next year are also cloudy as regulators have tightened policies related to IPOs and refinancing by property firms.

Sunac too had seen its banks look into credit risks after the first deal was announced, its chairman told local media.

Under the new deal, which will see proceeds to Wanda largely unchanged, R&F will purchase 77 hotels at a 40 percent discount to what Sunac originally would have paid. Sunac will pay more for the theme park assets, but will be free of the hotels that analyst say it was not really that keen on in the first place.

Importantly for Wanda, it removes a 30 billion yuan ($4.4 billion) loan the conglomerate had planned to extend to Sunac to finance the deal and will see Wanda pocket funds from the sale by end-January at the latest, rather than waiting three years for the loan to be repaid.

“The main difference in the revised deal is that Wanda no longer needs to loan money to Sunac which is beneficial to its cashflow,” said Franco Leung, an analyst at Moody’s Investors Service.

Investors in R&F and Sunac also cheered the new deal, sending their stocks to record highs.

R&F, which said the deal would make it the largest hotel owner in the world, saw its shares jump as much as 13 percent on Thursday while Sunac climbed as high as 18 percent.

And at Wednesday’s new conference, Wang was also quick to stress how much stronger Wanda’s commercial property unit would be once the deal was completed, saying “we have decided to pay off most of our bank loans”.

By the end of the year, Wanda Commercial will own 33 million square meters of commercial properties with rent surpassing 33 billion yuan in 2018, he said, adding that the unit will have an annual rent growth rate of about 20 percent for the coming five years.

“Is Wanda Commercial running a good business? You can make your own judgment,” he said.

Reporting by Clare Jim and Shu Zhang; Additional reporting by Matt Miller in Beijng; Writing by Adam Jourdan; Editing by Clara Ferreira-Marques and Edwina Gibbs

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