Embattled Chinese property developer Country Garden Holdings says it will sell its minority stake in a unit of Dalian Wanda Group, a fellow cash-strapped real estate and commercial conglomerate, to another Wanda company.
The deal comes as Country Garden seeks to shore up its severely strained finances and at a time when several of the country’s property companies are facing headwinds.
Under the agreement, Country Garden’s wholly owned subsidiary Gold Ease Global will dispose of its 1.79% holding in Zhuhai Wanda Commercial Management Group. The purchaser is Zhuhai Wanying Enterprise Management, a Wanda Group company and major shareholder of Zhuhai Wanda.
Zhuhai Wanda is the only business platform for Dalian Wanda Commercial Management Group, a core unit of Dalian Wanda Group, that takes an “asset-light” approach. Zhuhai Wanda operates and manages 494 large malls in 227 cities, with 290 of them owned by Dalian Wanda and 204 by a third party as of last month.
The total consideration of the transaction is 3.068 billion yuan ($432 million), and it is to be settled in three payments. The first two transactions will be done in yuan, while close to 80% of the remainder will be paid in U.S. dollars by the end of next March.
Country Garden was deemed to have defaulted on $11 billion worth of offshore bonds by the global credit industry arbiter Credit Derivatives Determinations Committees in October.
President Mo Bin said in the Thursday filing that the company is “actively seeking a comprehensive solution to fully address the current offshore debt risks” and that the net proceeds from this deal with Wanda “will be used for the offshore restructuring.” The company declined to comment further on the debt restructuring in an emailed response to Nikkei Asia.
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The Guangdong-based developer also admitted that it has been under “periodic liquidity pressure.”
The sale price of the Wanda stake is lower than the price paid when it was bought in July 2021. As a result, the company is set to record a comprehensive loss of about 160 million yuan on the sale.
However, Mo stressed that the deal “will be beneficial” as it is better to exit now, even at a discount, rather than wait and have to take a potentially bigger hit later.
The transaction comes days after Dalian Wanda Commercial Management Group announced a deal with PAG, a Hong Kong-based private equity firm, that in effect allows the group to postpone a payment to investors.
Under the agreement, PAG and other existing, non-Wanda investors will increase their overall stake in Zhuhai Wanda to 60%, meaning Wanda Group will relinquish majority control over the unit.
The group of non-Wanda investors invested about $5.9 billion in the unit in August 2021 and were originally entitled to redeem their investment by the end of this year. The renewed agreement means Wanda Group will avoid having to repay these investors immediately. Dalian Wanda Commercial Management originally planned to raise funds by listing Zhuhai Wanda on the Hong Kong Exchange, but that has not been approved.
“This new agreement reflects our confidence in Zhuhai Wanda’s growth potential and its management capabilities,” PAG said in a statement on Tuesday, while pledging to “improve the governance of Zhuhai Wanda” with other non-Wanda shareholders.
“Dalian Wanda appreciates the trust and support by the investors and will continue to support the development of Zhuhai Wanda,” a Wanda spokesperson said. – Nikkei Asia
