China’s largest commercial developer has failed for a third time to achieve a listing on the Hong Kong stock exchange, with the status of Zhuhai Wanda Commercial Management Group’s application for an initial public offering being updated to invalid as of Tuesday, HKEX records show.
Once foreseen by analysts as a $3 billion return to a Hong Kong bourse it had spurned in 2016, Wanda has struggled to drum up investor interest in its portfolio of over 400 malls (some 285 of which are owned by Wanda Group). With the ongoing stock exchange struggles Wanda has had to work out a new agreement with a consortium of pre-IPO investors including PAG, CITIC Capital, Country Garden Holdings, Ant Group, Tencent and the Cheng family of New World Development which had provided $1.3 billion in pre-IPO debt financing which would have become due on 8 May.
The company led by mainland billionaire Wang Jianlin has now secured out a six month extension with its creditors, which gives the company until 30 November to achieve its HKEX listing or repay the loan, according to an account in mainland news site The Paper, citing investors familiar with the updated agreement.
Wanda Group, which has been liquidating stakes in some of its listed entities as the deadline for the debt repayment had been approaching, is now said to be preparing a new application for a Hong Kong IPO for its mall unit. With that still in process Wang is said to have admitted in an internal meeting on Friday that the company was facing some challenges, while vowing to cut Wanda’s debt over the coming two years, according to an account by Reuters.
The cancellation of Wanda’s latest IPO attempt comes after the HKEX had listed the company’s application as “under review” on Monday, as it faced a 29 April deadline for approval under exchange rules.
Having bought out its Hong Kong-listed shares for $4.4 billion in 2016 in the hopes of achieving a higher valuation on a mainland bourse, Wanda’s attempts to list on the Shanghai or Shenzhen exchanges failed to gain approval from Chinese regulators. Needing to pay back investors who backed that 2016 privatisation, Wang sought to bring his mall unit back to the HKEX in October 2021 by filing the first in what is soon to become a series of at least four applications.
In addition to facing scrutiny from Hong Kong regulators, on 21 March the China Securities Regulatory Commission (CSRC) sent the group an inquiry letter regarding an application to issue corporate bonds to professional investors, with the document raising concerns about its Hong Kong listing and risks involved in meeting its financial obligations should it fail to meet its listing deadline.
The terms of Wanda’s pre-IPO financing, according to an account in Debtwire, require it to repay the $1.3 billion it received through three separate loans if it fails to achieve its listing, with the deadline for reaching that milestone now having been extended for a third time, according to the report in The Paper.
The deal is also said to have required Wanda to maintain a net profit of at least RMB 5.1 billion, RMB 7.4 billion and RMB 9.6 billion each year from 2021 to 2023. While Wanda’s RMB 3.1 billion net profit in 2021 failed to meet that goal, in its most recent IPO prospectus the company said that it had met the overall target.
Selling Off Stakes
While Wang once ranked as China’s richest man, the soldier-turned-tycoon has been selling off stakes in some of Wanda Group’s listed entities recently and raising over $200 million at the same time that the group’s IPO debt faced possible redemption.
On 19 April Shenzhen-listed Wanda Film Holdings announced that its controlling shareholder, Wanda Investment, planned to reduce its stake in the company by up to 3 percent or 65.38 million shares. The value of that stake sale was around RMB 953 million ($138 million) based on the stocks’ closing price that day.
“The reason for the stake reduction is due to the capital requirement of the shareholder itself,” Wanda Film said in the announcement.
That disposal followed Wanda Cultural Industry Group’s 18 March sale of 2 percent of its stake in Wanda Film via bulk trading, which raised approximately RMB 583 million.
Wang Jianlin, the founder of Wanda Group, serves as the ultimate controller of both Wanda Investment and Wanda Cultural Industry Group, with the two stake sales providing him with potential gross proceeds of over RMB 1.5 billion.
Earlier in January, Wanda Group pledged its 65 percent stake in Wanda Hotel Development, representing its entire ownership in its Hong Kong-listed hospitality investment division, to Singapore’s Temasek Holdings as collateral for a loan.