China’s Dalian Wanda Group Co. sold its 76 hotels, as well as land and other projects, for US$9.3 billion to Sunac China Holdings Ltd., which is making its foray into the hotel business after focusing on the now-slowing residential real estate business.
Wanda will retain management of the hotels and, perhaps more important, shed debt and scrutiny over of its loans. It has been widely reported recently that Wanda, along with other aggressive hotel acquirers Fosun International Ltd., HNA Group Co. and Anbang Insurance Group Co., is being questioned by the Chinese government about the sources of its overseas loans.
The move should also help strengthen Wanda’s case for a mainland China public listing after its property unit delisted from Hong Kong last year.
“Through this asset transfer, Wanda Commercial’s debt ratio will be greatly reduced, all the proceeds will be used to repay loans. Wanda Commercial plans to repay most of the bank loans this year,” Wanda owner Wang Jianlin told Chinese news agency Caixin.
Sunac, which has purchased more than US$12 billion in assets over the past year, and its billionaire Chairman Sun Hongbin, will purchase before July 31 a 91% stake in the hotels and 13 cultural and tourism projects. Sunac is reportedly paying US$4.94 billion for the 76 hotel assets.
Among the projects is “Wanda City,” a massive, multibillion-dollar development with theme parks and lodging. Wanda will control the construction and operation over the cultural projects and the firms will cooperate in a number of other areas, including films, according to the statement.
Sunac said it will use its own funds for the Wanda deal, with Wanda using the proceeds to pay back loans.”Through this asset transfer, Wanda Commercial’s debt ratio will be greatly reduced, all the proceeds will be used to repay loans. Wanda Commercial plans to repay most of the bank loans this year,” Wang told Caixin.
“I can only speculate that Wanda badly needed to do some financial restructuring (heavy debt, and perhaps pushed by the government to reduce it), while at the same off-loading some poorly performing assets, while retaining management, which as of last year was a priority,” Horwath HTL Managing Director Robert Hecker told HOTELS.
Hecker added that, perhaps, there will be more such arrangements as part of a campaign to clear up bad debt situations. “Though Wanda was pretty high-profile, so might be limited to them,” he said.