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Dalian Wanda cuts IPO size to US$3.9b on concerns over debt
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DALIAN Wanda Commercial Properties Co, the world’s second-largest developer of shopping malls and office buildings, cut the size of its Hong Kong IPO by around a third to US$3.9 billion to lure investors worried about its huge debt, analysts said.
The company, backed by Chinese billionaire Wang Jianlin, launched the deal yesterday and offered 600 million new shares in a range of HK$41.80 to HK$49.60 (US$5.39 to US$6.40) each, according to a term sheet.
It had earlier sought to raise as much as US$6 billion via the deal, Reuters previously reported. Analysts said the company cut the IPO after some buyers were put off by the 179.7 billion yuan (US$29.1 billion) in bond and loan debt it had amassed during a decade-long, rapid expansion drive.
Dalian Wanda’s gearing ratio, a measure of indebtedness, stood at 87.8 percent at the end of June, according to its draft prospectus, more than double the industry average of 40-50 percent, analysts said.
“Investors will be concerned about the debt,” said Alvin Cheung, associate director at Prudential Brokerage in Hong Kong.
The initial public offering is set to be priced on December 16. The shares are due to list on December 23.
Dalian Wanda’s indicative range represents a forecast 2015 price-to-earnings (P/E) multiple of 7.4–8.9 times, higher than the median P/E ratio of 5.93 for Chinese real estate companies, according to Thomson Reuters data.
A group of 11 institutional investors including the Kuwait Investment Authority and Och-Ziff Capital Management Group Ltd pledged to buy US$2 billion worth of shares in the IPO ahead of the launch.
But the debt levels — in addition to the prolonged slump in China’s real estate market — may put off retail investors looking for quick gains, according to analysts.
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