Titanium media note: This article comes from WeChat official account Phoenix WEEKLY Real Estate (ID: FHZKDC), author | Fu Linlin, editor | Cao Bei, titanium media is authorized to publish.
On the last day of the deadline, Wanda submitted its prospectus for the fourth time. The same thing was repeated several times, but Wanda still failed to go public.
Just before the announcement of the prospectus, Wanda Commercial Management suspended its application for the issuance of 6 billion-scale small public bonds.
In the first half of this year, Wanda lived between two faces: on the one hand, a string of excellent figures were presented to the regulators, waiting to be listed in the capital markets; on the other hand, the issue of the capital chain was directly put on the table, questioned by the China Securities Regulatory Commission, frozen equity, and project rights protection.
No one can give a definite answer. What happened to Wanda?
But expectations for the company have clearly reversed, from the prospect of returning to the top of the housing company to being in the quagmire, waiting for rescue.
On June 28, the official website of the Securities Supervision Commission announced the notice of the suspension of registration procedures for domestic bond issuance by Dalian Wanda Commercial Management. The planned issuance scale of the small public offering is 6 billion yuan, and the main underwriters are Guotai Junan and Kaiyuan Securities.
This is Wanda’s initiative to apply for the suspension of bond registration. In the face of the difficulties in financing real estate enterprises, the reasons behind the suspension of registration by Wanda Commercial Management have caused a lot of speculation, many of which are related to the listing of Zhuhai Wanda.
Wanda’s explanation is that Dalian Wanda Commercial Management terminated the issuance of small public bonds because the market conditions did not meet the company’s expectations and voluntarily gave up the issuance. However, the suspension of the bond registration process of the distribution company will not have a significant impact on the company’s liquidity in the short term, and it does not rule out resubmitting the bond issuance application in the future if conditions are met.
According to relevant regulations, if the China Securities Supervision Commission and the stock exchange decide to suspend the review based on the application of the issuer and the lead underwriter, after the relevant circumstances disappear, the issuer and the lead underwriter may apply to the China Securities Supervision Commission and the stock exchange to resume the review.
The bond has experienced many twists and turns since the application began.
On March 21, the website of the Securities Supervision Commission issued an inquiry letter on the application documents of the joint stock company of Dalian Wanda Commercial Management Group to disclose the bonds of the distribution company to professional investors.
Zhuhai Wanda, a subsidiary of Wanda Commercial Management Group, is currently applying for listing on the Hong Kong Stock Exchange. If the listing is not successful at the end of 2023, Wanda Commercial Management Group needs to pay about 30 billion yuan to pre-listing investors for share repurchase.
The Securities Supervision Commission requested Wanda Commercial Management Group to further post script on the listing progress of its subsidiary Zhuhai Wanda and assess the impact of the above matters on the issuer’s short-term solvency.
According to the disclosure of the application materials, in the past three years and the first phase (2020, 2021, 2022 and 2023 January-March), the net cash flow generated by the financing activities of Wanda Commercial Management Group was – 24.50 billion yuan, – 32 billion yuan, – 11.30 billion yuan and – 18.20 billion yuan.
The Securities Supervision Commission requires Wanda Commercial Management Group to post script the reasons and rationality for the continued large negative net cash flow of financing activities, and to evaluate the impact on the repayment of this bond.
According to the "Administrative Measures for the Issuance and Trading of Corporate Bonds" (Order No. 180 of the Securities Supervision Commission), Wanda Commercial Management Group is required to implement it item by item and submit a written reply and electronic documents to the Shanghai Stock Exchange within 3 months. If the reply cannot be made on time, the Securities Supervision Commission may make a decision to terminate the review according to law.
At present, Wanda Commercial Management has not replied to the above questions, but has only publicly replied to some news circulating in the market.
A real estate investment and financing person told Phoenix WEEKLY Real Estate: "If Wanda wants to reply, the principal and the law firm must confirm the signature. After this aspect is resolved, the regulators will agree or not."
Shen Meng, a director of Chanson Capital, said: "Suspension of bond issuance is usually chosen after full informal communication with relevant institutions and confirmation that it is difficult to move forward. Therefore, it cannot be ruled out that Wanda believes that the success rate of bond issuance at this time has been greatly reduced based on the current overall situation."
The suspension of bond registration and the issuance of the fourth prospectus at the same time have also raised questions about whether the two are related.
However, a Financial Institutions Group source told Phoenix WEEKLY: "The main body is different. Wanda Commercial Management needs money now, and the money after the listing should be to increase capital to Zhuhai Wanda. The impact on Wanda Commercial Management is that there is no need to deal with the redemption of shares."
In fact, the suspension of the financing of the 6 billion still has an impact on the Wanda business management in a state of tight funds. Recently, there have been rights protection in many places such as Wanda business tickets and housing delays.
Wanda is also raising money by selling stakes in project companies.
On June 26, according to the information disclosed by the National Enterprise Credit Information Publicity System, the shareholders of Wuhan Huada No. 9 Innovation Investment Partnership (Limited Partnership) under Wanda Real Estate changed.
According to the change of shareholders information, Wanda Real Estate Group Co., Ltd. and Huarong Capital Management Co., Ltd. respectively transferred 85.7206% of the shares and 0.3175% of the shares of Wuhan Huada No. 9 Innovation Investment Partnership (Limited Partnership), and the transferee was China Huarong Asset Management joint stock company.
After the equity transfer, China Huarong held 86.0381%, Wanda Real Estate Group Co., Ltd. held 13.9104%, and Huarong Capital Management Co., Ltd. held 0.0515%.
The only foreign investment company of Wuhan Huada Jiu Innovation Investment Partnership (Limited Partnership) is Wuhan Wanda East Lake Real Estate Co., Ltd., which is the project company of Wuhan Central Cultural District.
Here is Wanda’s benchmark project, Hanjie.
According to public information, the Wuhan Wanda Chuhe Han Street Project is located in the Wuhan Central Cultural Center. It is a "world-class cultural tourism project" built by Wanda with culture as the core and integrating tourism, commerce, business and residential functions. The project is the largest investment in the cultural industry of a single project in China. The investment in pure culture reaches 8 billion yuan, the total investment is about 30 billion yuan, and the total construction area is 3.40 million square meters. It officially opened on September 30, 2011.
A person familiar with the matter told Phoenix WEEKLY Real Estate: "In fact, it was in May. On the surface, it was an equity financing. In fact, Chongqing Trust expired and had no money to pay it back. I asked Huarong to do a financing. In fact, it was a real debt."
And "Phoenix WEEKLY Real Estate" found that the project companies under Wanda Real Estate Group are basically 100% shareholding, and only a few trust companies have been introduced as shareholders. It is difficult to guarantee that this method of Wuhan projects will not be replicated in the future. After all, many of Wanda’s real estate projects across the country are facing the risk of shutdown.
The above-mentioned fund person said: "The key is for the Financial Institution Group to recognize Wanda. Trusts are all raised money and cannot come out. Investors will protect their rights."
At present, the financing channel of Wanda Plaza is still smooth.
On June 13 this year, the Shanghai Stock Exchange disclosed that the project status of the first phase of the asset-backed special project plan of CICC Huatai-Wanda Plaza was updated to "Feedback". The bond variety is ABS, the proposed issuance amount is 3.501 billion yuan, the plan manager is Huatai Securities (Shanghai) Asset Management Co., Ltd., the original equity is Dalian Wanda Commercial Management Group joint stock company, and the project acceptance date is March 30, 2023.
This year, the Securities Supervision Commission has conducted two inquiries on Wanda, the first for bond issuance and the second for listing.
Listing is the biggest hurdle for Wanda this year. According to the latest version of the prospectus, in 2022, Wanda Commercial Management will achieve revenue of about 27.12 billion yuan, gross profit of about 12.984 billion yuan, profit before tax of 9.303 billion yuan, and net profit attributable to shareholders of about 7.503 billion yuan.
In terms of business scale, by the end of 2022, Wanda Commercial Management managed 472 commercial plazas with a construction area of 65.60 million square meters under management. In 2020, 2021 and 2022, the average occupancy rate of Wanda Commercial Management’s commercial plazas under management (excluding parking spaces) was 98.6%. By the end of 2022, Wanda Commercial Management had 181 reserve projects, including 163 independent third-party projects.
The data is still very bright, but the key question, Wanda still did not reply.
In June, the Securities Supervision Commission released the latest "requirements for publicity of supplementary materials for the filing of overseas issuance and listing", of which Zhuhai Wanda was the first to issue seven requirements, involving six issues.
Among them, it is required to clarify the post-listing fundraising management and red lines, as well as to refine the fundraising management and commitment not to directly or indirectly flow into real estate.
In addition, according to the prospectus, Zhuhai Wanda’s cumulative cash dividends during the reporting period (2019 to 2021 and the first half of 2022) were 13.27 billion yuan, exceeding the total net cash flow from operating activities for the same period by 11.548 billion yuan.
In addition to the huge dividend, Zhuhai Wanda’s shareholder meeting in late September last year approved the "dividend 3.478 billion yuan" proposal. After listing, the board of directors plans to recommend at least 65% of the annual distributable profit to be used for dividends at the shareholder meeting.
The Securities Supervision Commission requires Zhuhai Wanda to explain: the rationality of the cash dividend amount and future cash dividend policy during the reporting period, whether there is a significant impact on the company’s solvency and continuing operation, and the necessity and rationality of implementing this financing in the case of large cash dividends.
The two questions directly point to the relationship between real estate and business management in Wanda’s business.
One analyst said: "In Wanda’s business system, the existing funding problem is the real estate business. The rental income goes to the commercial management, and the depreciation of shopping malls and loan interest go to the real estate. This has resulted in high profit margins in the commercial management business, which is convenient for listing. Before listing, the profits were used to repay the debt of the real estate, but after listing, the money is not easy to do. The problem with the Securities Supervision Commission is that since you have so much profit to pay dividends, why are you still listed for financing?"
Other issues related to corporate governance, the relationship with the parent company, the authenticity of data, and the risk of gambling all require Wanda to resolve them one by one.
"With Wanda’s current business income, if the Zhuhai Commodity IPO cannot go ahead, Wanda’s solvency may be greatly weakened," Ms Shen said. "Zhuhai Commodity IPO has been delayed and Dalian Wanda has suspended bond issuance, which will exacerbate the tension in Wanda’s capital chain and even cause liquidity risks."
For Wanda, the top priority is to go public, but under the many problems, it is difficult to attract widespread attention by submitting a listing application four times. The outside world is only waiting for the end of the year. Before that, this giant ship is still sailing in the fog. If it wants to go public smoothly, it may first have to sail out of the fog.
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