China’s real estate sector is monitoring the debt crisis faced by Wang Jianlin, the head of China’s largest commercial real estate developer.
The latest noteworthy news dates back to last summer. Wang Jianlin, once Asia’s richest man, was described by informed insiders as being in enormous financial difficulty.
Wang is the head of Dalian Wanda, a Chinese conglomerate. The company is known for having its name on the stadium of the Spanish football team Atletico Madrid, as well as for purchasing shares in the team. It has also acquired Infront, which gives it control of the television rights for Serie A, the top Italian football tournament. Wang has also expressed plans to create a new Hollywood.
However, this golden past has been buried under a mountain of debt. Between June and July 2023, Mr. Wang tried in every way to avoid the default of his creation through the sale of assets. The group, active in the real estate and entertainment sectors, sold a 51% stake in Beijing Investment to film and gaming company China Ruyi for 2.26 billion yuan ($315 million), after having already sold a stake by 49% to repay $400 million in maturing bonds.
Wanda then sold off its flagship Wanda Plaza shopping complexes in Shanghai, Suzhou, Huzhou, and Guangzhou, while other corporate arms sought to extend the maturities of other hefty bonds over the long term.
The Decline of Wanda
Wanda, among other things, was downgraded by major rating agencies to junk territory due to uncertainties over its ability to pay the dollar bonds. Also last July, it seemed that Wang’s company might have a grace period of a few dozen days before it could face a default.
S&P Global Rating also said the property management unit, Dalian Wanda Commercial Management (DWCM), only had about $200 million in offshore cash it could access. Wang himself, meanwhile, has seen his wealth collapse by almost 80% from the peak of 33 billion dollars in 2016. The tycoon has so far avoided the collapse of the conglomerate, which however still faces enormous pressure to repay the debts.
This is a dramatic change of fortune for Wang, who once harbored ambitions to challenge American entertainment giant Disney. The price to pay was very high, given that today the man’s assets are around 6.3 billion dollars, while the empire he built starting in 1988 - which boasted investments in the real estate sector, financial and cinematographic – has been significantly reduced.
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The Chinese real estate industry is monitoring the debt crisis faced by Wang Jianlin, the head of China’s largest commercial real estate developer, the same one that operated numerous shopping malls, offices, and hotels across the country.
For the moment Wanda is holding her breath and resisting but investors are apprehensive. Speaking of the real estate node, we recall that, as part of a support package for the real estate sector hit by the crisis, last month Beijing announced a loan plan of 300 billion yuan (41 billion dollars), which could result in bank financing worth 500 billion for the purchase by local state-owned enterprises (SOEs) of completed and unsold houses.
Only a handful of struggling developers will benefit. Completing construction is the problem facing struggling developers,” said S&P Global Ratings credit analyst Esther Liu. As developers await clarity on state-owned companies’ demand and price offers, some bankers say the affordable housing program could lead to a deterioration in asset quality as state-owned companies would struggle to generate enough profits to repay loans banking. It is such a scenario that the former giant Dalian Wanda finds herself forced to swim to avoid drowning.
Original article published on Money.it Italy 2024-06-23 06:35:00. Original title: Ascesa e declino di Dalian Wanda: il gigante cinese sull’orlo del crac
