July 29, 2021

Wanda, HNA … Chinese conglomerates in crisis

Notice of construction site at large Chinese groups. Faced with significant funding difficulties, the Wanda, HNA and Anbang groups are desperately looking for cash. Some are ready to take advantage: Monday, January 22, a group of four investors led by Tencent, the largest Chinese market capitalization, announced a stake of 14% in Wanda. The group of the ambitious Wang Jianlin, ex-richest man in China, brought to his knees by the debts, and by the Chinese power, thus sees a giant of the technology, led by the discreet Pony Ma, become the biggest fortune of the country, reach out to him.

For Wanda, the Tencent effect seems to be working. On the day the Chinese media giant’s investment was announced, Wanda Commercial Properties’ price on the Hong Kong Stock Exchange rose 52%. With 34 billion yuan (4.34 billion euros) of new money, the real estate group should be able to breathe and complete more calmly a restructuring begun this year. Chaining the buybacks abroad, in real estate, cinema, entertainment, the conglomerate was warned in June by the Chinese financial authorities, who were concerned about the over-indebtedness of five major groups.

“Irrational” investments

At the same time, the HNA group, which was also increasing its acquisitions, in real estate, tourism or finance (the group is the majority shareholder of Deutsche Bank), is struggling to repay its debts. Also pointed in June for its investments “Irrational”, HNA has a stronger balance sheet than Wanda, but is also looking for new money. The parent company of Hainan Airlines has started with aviation and tourism to expand into sectors as diverse as hospitality, logistics, finance, oil storage and cloud computing. Since 2015, HNA operates almost like an investment fund: the group has invested abroad for 40 billion dollars (32.1 billion euros), amassing a total debt of nearly 100 billion dollars, for 178 billion in assets, according to the group.

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Last June, the Chinese banking regulator asked the large state-owned banks that fund these groups to conduct a thorough review of their finances. HNA and Fosun, the owner of Club Med, have done relatively well, being able to continue to invest as long as they downsize, where Wanda and insurer Anbang have been hit hardest. But the tide is turning for HNA: at the end of November, the rating agency Standard & Poors lowered its rating from B + to B (very speculative). For HNA subsidiaries, borrowing rates have climbed in the bond market in recent weeks, sometimes as high as 9%, forcing some of them to cancel planned debt raisings.

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