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$China Tycoon Who Lost $32 Billion Tries to Salvage an Empire
By Shirley Zhao, Venus Feng, and Rebecca Choong Wilkins
March 15, 2021, 12:00 PM PDT Updated on March 16, 2021, 2:31 AM PDT

https://www.bloomberg.com/news/articles/2021-03-15/china-tycoon-who-lost-32-billion-tries-to-salvage-his-empire

Wang Jianlin used to be Asia’s richest person, busy expanding his Dalian Wanda Group Co. by acquiring trophy assets overseas, all aided by easy credit.

Now the 66-year-old doesn’t even figure among China’s top 30 richest people, having lost about $32 billion of his personal fortune in less than six years -- the most for any tycoon in that period. As Wang seeks to cut the group’s total debt from 362 billion yuan ($56 billion) and turn his entertainment-to-property empire around, he’s facing skeptical bond investors.

Braced for a wall of maturing onshore notes peaking this year, some of Wanda’s dollar bonds were among the first to tumble earlier this month, when a broader decline hit the Asian credit market. The selloff, partly triggered by concerns over the looming payments, came as a warning from investors eager to see how Wang will manage to steer his group clear of the debt risks that convulsed peers such as HNA Group Co., China Evergrande Group and Anbang Group Holdings Co.

“The group’s liquidity is a key consideration for investors,” said Dan Wang, an analyst at Bloomberg Intelligence. A representative for Wanda didn’t respond to requests for comment on the debt risks.

Wanda’s Wang, who once purchased Spanish soccer club Atletico Madrid as part of the binge-buying and aspired to compete with Walt Disney Co., is still shedding some of those assets. The latest came last week, when Wanda gave up control of AMC Entertainment Holdings Inc., with its stake now representing less than 10% of the world’s largest movie-theater chain. Its chief executive officer said the company would be governed by a wide group of shareholders, and the stock has surged more than 42% in the past three days.

Despite the disposals following a government crackdown on credit-fueled expansion, Wanda Group’s debt as of June ballooned to the highest since 2017. The pandemic has only added to the woes, dealing a blow to its cinemas, malls, theme parks, hotels and sports events.

Three Pillars
Malls and hotels accounted for almost half of Wanda's 2019 revenue


Source: Wanda Group

Note: Graphic excludes 7.5 billion yuan in losses from Wanda's other investment activities

As China stabilizes its economy after containing the virus, the reopening of movie theaters and malls is providing Wang the much-needed time to steady his ship. He’s pressing ahead with a strategy he’s advocated for years, called the “asset-light” model, to reduce leverage.

That means spending less by cutting back on land purchases. Dalian Wanda Commercial Management Group Co., one of the world’s biggest mall operators that accounts for almost half of the group’s revenue, will stop buying plots starting this year and license its brand to partners instead, the company’s President Xiao Guangrui told mainland media in September.

No Alternative
“Wanda had no real alternative to its new asset-light strategy,” said Brock Silvers, chief investment officer at Kaiyuan Capital in Hong Kong, who doesn’t hold any Wanda unit shares or bonds. “The company’s debts were unsustainable.”

The effect of the pandemic on Wanda has been astounding.

Movie producer and cinema operator Wanda Film Holding Co. said it may have racked up a record $1 billion in net loss last year. Despite becoming a favorite in the recent Reddit-fueled share rally, AMC warned several times it was near the brink of insolvency and reported its worst-ever annual loss as revenue plunged 77%. Wanda Commercial Management said sales and profit fell nearly 50% in the first nine months of 2020, while Wanda Sports Group Co.’s American depositary receipts were delisted in January after losing more than two-thirds of their value since they began trading in July 2019.

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A closed AMC movie theater in Tucson, Arizona, in June 2020.Photographer: Cheney Orr/Bloomberg
Even if Wanda’s businesses tide over the global health crisis, there’s no certainty creditors will be kind after the developments at other indebted Chinese conglomerates such as HNA, Evergrande and lately at Suning Appliance Group Co.

MORE ON TROUBLED CHINESE CONGLOMERATES:
China Is Said to Mull Ways to Contain Evergrande Risks

Fallen Giant HNA to Be Restructured With Asset Sales Planned

Tycoon Who Helped Evergrande Has Debt Challenges of His Own

Anbang Said to Near Asset Sales in China, U.S. as Empire Unwinds

In an offering circular in September, Wanda told investors that the group’s level of indebtedness may “adversely affect” some operations. The conglomerate is also facing tighter credit rules in the real estate sector as Chinese regulators look to curb financial risk.

Wanda and its units raised about 48.2 billion yuan in local and offshore debt last year, the most since 2016. A part of it was used to pay older obligations as the group needs to refinance or repay about 32 billion yuan of domestic bonds due in 2021.

While the group’s dollar bonds have almost erased their losses since tumbling earlier this month -- their worst week in almost a year -- credit traders cited concerns over the group’s maturing local bonds and a selloff in some of its onshore notes.

Wanda Commercial Management’s debt is rated non-investment grade by Fitch Ratings, S&P Global Ratings and Moody’s Investors Service.