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Business deals

Wanda sells landmark London project to pay down debt

Troubled conglomerate expects a gain of $55 million from the sale

Artist's rendering shows One Nine Elms condominium complex along the River Thames in London. Wanda's first overseas development project clinched in 2013, but now being sold to pay down its debt.

HONG KONG -- A Hong Kong-listed arm of Chinese conglomerate Dalian Wanda Group has agreed to sell a London skyscraper project to pay down debt amid Beijing's crackdown on "irrational" overseas deals.

Wanda Hotel Development said in a Tuesday night statement it agreed to sell the 60% stake it held in a luxury project by the River Thames to an unidentified buyer for 35.6 million pounds ($49 million).

The buyer, named by other media as Guangzhou R&F Properties Co., would take over its debt of about 159.5 million pounds in the project. The remaining 40%, owned by subsidiary Wanda Commercial Properties (Hong Kong) and a controlling shareholder of Wanda Hotel, would also subsequently be offloaded to the buyer.

Wanda said it would mark a gain of 434 million Hong Kong dollars ($55 million) from the sale.

The Dalian-based group is under pressure to repay its overseas creditors after a multiple-year shopping spree that brought some of the world's most valuable football clubs and Hollywood studios under its portfolio. The group last month denied it faced financial problems, claiming it had $30 billion of cash on hand, but Beijing's ongoing crackdown on capital outflows has thrown a wrench in the works.

As part of its "strategic review," the company said the sale would "strengthen the liquidity and financial position" of the company, and the proceeds would not only be used to repay loans and interest, but also to finance operations and the development of existing projects.

The London property, One Nine Elms, is Wanda's first overseas development project, clinched in 2013 at 93 million pounds. The project was to develop two skyscrapers that would contain residences, offices, retail outlets, and a five-star hotel under the Wanda brand, due to start operation in 2019. After One Nine Elms, Wanda made a series of "trophy" acquisitions that significantly raised its international profile. 

Guangzhou R&F Properties is the same buyer of Wanda's hotel portfolio last year. Calls by Nikkei Asian Review to Guangzhou R&F on Wednesday were not answered.

Last year, China's banking regulator slammed some of Wanda's overseas investments as "irrational" deals that had burdened domestic lenders with "systemic risk," and reportedly ordered state-owned lenders to stop financing its acquisitions.

The disposal of the London property has raised concerns over the fate of group's other trophy assets at a time when it is under growing pressure to meet offshore obligations amid Beijing' s stringent capital controls.

The conglomerate has an agreement to repay a $1.7 billion syndicated loan in three installments. The first of $170 million was paid in November, and the market is keeping a close eye on whether it would be able to meet the other two -- $510 million by March and $1 billion by May.

Encouraged by news of the sale, shares in Wanda Hotel Development jumped as much as 15% to HK$1.53 in morning trade in Hong Kong. They closed at HK$1.38, 3.8% higher than Monday, but significantly below the year high of HK$2.39 marked last August. 

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