Investors in Dalian Wanda Group Co.’s mall unit have turned down an initial proposal by the Chinese conglomerate to delay the repayment of 30 billion yuan ($4.1 billion) plus interest due by year-end, according to people familiar with the matter.
Wanda proposed repaying investors in Zhuhai Wanda Commercial Management Group Co. via installments over four years, while offering a more than 20% stake in the unit as collateral, the people said, asking not to be identified discussing private information.
Under terms of the original investment, Wanda had agreed to repay pre-IPO investors 30 billion yuan if Zhuhai Wanda failed to list shares by the end of 2023. The new proposal suggests the company sees little chance of an initial public offering any time soon.
The cool reception from investors adds pressure on Wanda to come up with a sweetened offer with just six weeks to go before the repayment deadline. The conglomerate is considering a range of options — including additional stake sales in the mall unit and private credit lines — as it seeks to shore up its liquidity, the people said.
Worries about a potential cash crunch if Wanda fails to reach an agreement have spooked bond investors already grappling with a widespread debt crisis in China’s real estate industry.
Private equity firm PAG is the biggest investor in Zhuhai Wanda’s pre-IPO round, while billionaire Wang Jianlin, through Dalian Wanda Commercial Management Group Co., controls more than 78% stake, according to the mall unit’s preliminary prospectus. The repayment delay proposal would have allowed Wanda to keep a controlling stake in the shopping mall unit, the people said.
Lukewarm Response
As it seeks to boost funding, Wanda is also considering raising funds by selling down stakes in the shopping mall unit, the people said. It has held talks with several Chinese real estate developers over a potential minority stake sale in Zhuhai Wanda, though interest has so far been lukewarm as potential investors aren’t keen for non-controlling stakes, the people said.
Wanda is also exploring tapping private credit lines by pledging its stake in the mall unit as collateral, the people said.
At the same time, Wanda is facing demands from investors in Dalian Wanda - the entity that holds Zhuhai Wanda’s stake - for share buybacks, people familiar with the matter said. Chinese developer Sunac China Holdings Ltd., which is going through debt restructuring, has asked Wanda to buy back their shares so that they can recoup some cash. However, the talks haven’t yet led to any deals. Sunac was part of a consortium that invested about 34 billion yuan for a roughly 14% stake in Dalian Wanda in early 2018, according to Wanda’s website.
Deliberations are ongoing and Wanda continues to work with its investors on the compensation and share buybacks and could still reach agreements at some point, according to the people. Representatives for PAG, Sunac and Wanda didn’t immediately respond to requests for comment.
Wanda was once seen as among the few high-quality Chinese issuers in the junk-bond market because it focuses on commercial real estate and asset-light property management business. Other than PAG, Zhuhai Wanda attracted a marquee list of pre-IPO investors including Ant Group Co., Citic Securities Co. and Tencent Holdings Ltd., its prospectus shows.
Zhuhai Wanda managed 472 malls across China as of the end of 2022 and also had 181 projects in the pipeline, including 163 from independent third parties, according to its prospectus. The company filed its Hong Kong listing application for the fifth time last week.
--With assistance from Emma Dong.
