China to punish Wanda for breaching investment rules

This file photo taken on February 10, 2015 shows Wang Jianlin, chairman of Wanda Group, speaking at a ceremony in Beijing. China's richest man lost 3.6 billion USD in a single day after global stock markets tanked and Chinese markets erased all their gains for the year. Wang Jianlin, chairman and founder of property and entertainment company Dalian Wanda, lost more than 10 percent of his total wealth on August 24, 2015, according to the Bloomberg Billionaires Index, which tracks the world's richest people. AFP PHOTO

BEIJING: China plans to punish billionaire Wang Jianlin’s Dalian Wanda Group Co. for breaching the nation’s restrictions on overseas investments by cutting off funding and denying the conglomerate with necessary regulatory approvals, according to people familiar with the matter.

The government has found violations of China’s restrictions in six investments, four of which have been completed and two are still pending, according to the people, who asked not to be identified because the matter is private.

 The deals being scrutinized include a Wanda unit’s purchase of Nordic Cinema Group Holding AB and Carmike Cinemas Inc., the people said, without identifying the remaining transactions.

A Wanda representative declined to comment. China’s banking regulator didn’t immediately respond to requests for comment.

The move represents an unprecedented setback for China’s second-richest man, who was among the country’s most prominent dealmakers up until last year by gobbling up Hollywood assets such as “Kong: Skull Island” producer Legendary Entertainment. 

For the government, targeting one of the country’s top businessmen represents an escalation of its broader efforts to crack down on capital outflows.

Wanda Properties International Co.’s 2024 notes declined as much as 4.8 cents on the dollar to 100.2 cents in afternoon trading in Hong Kong on Monday, according to Bloomberg-compiled data. 

Wanda Hotel Development Co. shares fell as much as 7.3 percent.

According to the people, the four completed deals will be subject to punitive measures including:

* No financing from domestic banksAssets will be barred from being injected into any listed entity in ChinaWanda will be barred from injecting capital into those assets from within China or involve them in any restructuring with any of Wanda’s domestic units.

* No government approval will be given if Wanda attempts to sell those assets to any Chinese companies

* On the two pending deals, related authorities won’t provide support with financing or foreign-exchange-related approvals needed to move money out of China, according to the people.

Wanda is among conglomerates including Fosun International Ltd., HNA Group Co. and Anbang Insurance Group Co. whose loans are under government scrutiny after China’s banking regulator asked some lenders to provide information on overseas loans to the companies, people familiar with the matter said in June.

Though cutting off funding may pressure Wanda, the group is poised to get some relief after it agreed to sell hotels, land and projects to Chinese developer Sunac China Holdings Ltd. in a 63.2 billion yuan ($9.3 billion) deal announced last week. 

For Wang, the sale of the bulk of his “Wanda City” projects -- massive multi-billion-dollar complexes with theme parks and lodgings -- represented a departure from the billionaire’s past predictions that he would build a tourism empire bigger than that of Walt Disney Co.

The Wall Street Journal earlier reported that China is restricting the completion of six overseas deals by Wanda Group following the government’s broader crackdown on offshore investments, citing documents. - Bloomberg