China blocks Dalian Wanda from completing overseas deals, reports Wall Street Journal

The Journal says the document, according to a person familiar with the matter,  likely refers to Wanda deals dating back about five years in the US and Europe.
The Journal says the document, according to a person familiar with the matter, likely refers to Wanda deals dating back about five years in the US and Europe. PHOTO: REUTERS

BEIJING (Reuters, Bloomberg) - Chinese banking regulators have ordered the nation's big banks to put the brakes on loans to property giant Dalian Wanda Group, the Wall Street Journal reported on Monday (July 17).

China's banking regulators met with executives of the country's big state-owned banks on June 20 and advised them that Dalian Wanda's foreign acquisitions were subject to the capital restrictions imposed by the government last year, the journal reported, citing a document from one on the participating banks.

The Journal says the document, according to a person familiar with the matter,  likely refers to Wanda deals dating back about five years in the US and Europe. Although four of the deals have already closed, the action would appear to block Wanda from getting new financing in connection with them from Chinese banks. It also clouds financing for the two deals yet to close.

China plans to punish Wanda for breaching the nation’s restrictions on overseas investments by cutting off funding and denying the conglomerate with necessary regulatory approvals, according to people familiar with the matter, reported Bloomberg News.

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The move represents an unprecedented setback for Wanda's owner Wang Jianlin, China’s second-richest man, who was among the country’s most prominent dealmakers up until last year by gobbling up Hollywood assets such as “Kong: Skull Island” producer Legendary Entertainment.

Dalian Wanda could not be reached for comment.

Reuters reported last month that China's banking regulator had ordered a group of lenders to assess their exposure to offshore acquisitions by some companies that have been on an overseas buying spree, including Dalian Wanda.

China's State Council, or Cabinet, put in place rules restricting outbound Chinese investment in late November 2016, in a bid to prevent money from leaving the country as accelerated outflows put enormous pressure on the Chinese yuan. As part of the rules, Chinese companies are discouraged from making overseas deals related to real estate and entertainment.

Dalian Wanda has purchased a slew of cinema assets globally, acquiring AMC Entertainment Holdings Inc in the United States and taking a controlling stake in U.S. film studio Legendary Entertainment last year.

In a surprise move last week,  Wanda said it  plans to sell tourism projects and hotels in the country to Sunac China  for US$9.3 billion, as it dials back its theme-park ambitions and brings down its debt pile.

The sale - the second-biggest real estate deal ever in China according to Reuters data - will help strengthen Wanda's case for a mainland listing after its property unit delisted from Hong Kong last year. For Sunac, it would mean ownership of a wide portfolio of tourism developments at a time when it is spending billions on property and technology assets.

Wanda said it would offload 91 per cent of thirteen cultural tourism projects, which usually include theme parks and leisure complexes, and 76 hotels to the acquisitive Tianjin-based developer Sunac for 63.18 billion yuan.