Wang Jianlin, the billionaire magnate behind China’s Dalian Wanda Group, is wrestling with significant financial challenges in the form of mounting debt. The founder of the sprawling conglomerate, with interests spanning entertainment to real estate, has weathered previous liquidity crises. However, this time he faces amplified hurdles with tightening regulations and dwindling financing channels.
Efforts to generate funds through the potential Hong Kong listing of the group’s property management arm, Zhuhai Wanda Commercial Management, have proven increasingly challenging. Despite re-submitting its prospectus for the fourth time, previous attempts since 2021 have fallen through amidst volatile market conditions and intensified scrutiny of the property sector.
The repercussions of failing to secure a listing by year-end could be severe for the parent company, Dalian Wanda Commercial Management (DWCM). The group may be obliged to repay up to 30 billion yuan ($4.2 billion) to pre-IPO investors, according to the terms disclosed by China’s securities regulators. To add to the company’s woes, the regulators have also dismissed Wanda Commercial’s application to issue about $830 million worth of bonds.
The current challenges represent a stark reversal of fortune for Wang, whose net worth has plummeted nearly 80% from a high of $33 billion in 2016. Now, the empire he has built since 1988, encompassing real estate, finance, and movie theaters, faces a rapidly deteriorating landscape.
Beijing’s gradual shift away from a dependency on the real estate sector to fund the economy has further compounded these challenges. The reluctance to introduce wider stimulus measures, such as increased infrastructure and property spending, has also raised concerns despite the sluggish recovery following the easing of Covid-related restrictions earlier this year.
DWCM’s capacity to repay its approximately $13 billion in impending debt, including IPO expenses also considered as liabilities, is at risk. Moody’s Investors Service suggests that without new funding, the company’s liquidity will “weaken significantly”. Wang has maintained confidence in overcoming the challenges, managing to maintain investor trust even following a further downgrade of DWCM into junk territory by rating agencies over concerns about the potential cash outlay for a failed IPO.
The current troubles also cast a long shadow over the broader finances of the conglomerate, given that parent company Dalian Wanda has three sets of offshore loans totaling $1.3 billion linked to the listing. This scenario could lead to lenders demanding early repayment if the IPO isn’t completed by May, according to a recent filing.
Increasingly, Dalian Wanda may have to resort to divestment to raise more funds. It had previously sought to sell 20 shopping malls, but the company must negotiate with local governments as it is obligated to retain ownership of the projects for specified periods. Buyers are proving scarce as many of Wang’s previous purchasers now grapple with their own debt issues.
As Shanghai Maoliang’s Shen Chen suggests, Dalian Wanda may have to resort to selling assets overseas or taking out loans by mortgaging unpledged shopping malls. However, he warns that the available amount may still be insufficient to fill the financial gap. The situation, he says, is “more troublesome now”, and there appears to be no easy solution on the horizon. The company might need to open discussions with its pre-IPO investors, which could be a less challenging option than negotiating with the securities regulators.