The order appears to retroactively apply to six of Wanda’s largest overseas deals, including the buyout of Legendary Entertainment and AMC Entertainment.
Chinese billionaire Wang Jianlin’s cash-flow woes could be on the rise.
The Chinese government’s top banking regulators have ordered the country’s largest financial institutions to stop lending to the tycoon to finance his overseas entertainment acquisitions, according to a document seen by The Wall Street Journal.
Beijing officials are understood to have convened a meeting with the executives of China’s largest financial institutions on June 20, where the bankers were informed that six of Wanda’s major overseas acquisitions — including the buyout of AMC Entertainment in 2012 and Thomas Tull’s Legendary Entertainment for $3.5 billion last year — were subject to the government’s restrictions on capital outflows last year.
Other Wanda deals included in the order were: U.S. exhibitor Carmike Cinemas, U.K. yacht maker Sunseeker International, Europe’s largest movie theater chain Odeon & UCI Cinemas Group, and Stockholm-based Nordic Cinema Group.
Four of those deals already closed months ago, and the two remaining transactions — the buy-outs of Odeon and Nordic — are being executed by Wanda’s AMC unit, which trades on the New York Stock Exchange and would appear to be outside the reach of Chinese regulators. But insiders tell the Journal that the new regulatory actions can be expected to prevent Wanda from generating new financing in China related to the four past transactions, as well as the two that are pending. Whether Wanda will proceed with the pending deals for the two European cinema operators given the government’s apparent discouragement also is an open question.
Chinese dealmakers announced a staggering $246 billion in outbound acquisitions last year, but Beijing’s regulators have since hit the breaks. In an effort to stem capital flight, which was seen as contributing to a devaluation of China’s battered currency, the government upped scrutiny of large transactions and instituted various measures to make it more difficult for acquirers to shift capital overseas.
Although known for its close government connections, Wanda has increasingly found itself squeezed within the regulatory clampdown. According to the Journal‘s sources, the new order will prevent Wanda from using any of its mainland Chinese funds to further capitalize its overseas assets. Wanda also remains banned from injecting any of the foreign entities into its publicly traded company in China, Wanda Film Holdings Co. Wanda attempted to merge Legendary with Wanda Film last year, but the deal was derailed by the authorities.
More to come…