By AMIE TSANG and SUI-LEE WEE
July 18, 2017
AMC Entertainment on Tuesday tried to distance itself from debt concerns swirling around its Chinese parent company that have sent shares in the American cinema chain falling.
AMC has been caught up in the scrutiny surrounding its owner, Dalian Wanda, which is among several Chinese conglomerates that have borrowed heavily to finance deals around the world.
The debt burden facing companies and consumers in China has been of increasing concern to the authorities and to analysts. They fret that excessive loans to companies like Wanda and the property developer Sunac China Holdings, which have stakes in several different sectors, could put the broader economy at risk.
AMC said on Tuesday, however, that Wanda had not been a source of acquisition funding and that mainland Chinese banks had never been used for any funding by the American cinema chain.
“Wanda has been a terrific shareholder, and we are grateful for Wanda’s support of AMC’s efforts over the past few years to grow our business,” Adam Aron, AMC’s chief executive, said in a statement. “Wanda does not actively participate in the day-to-day running of AMC beyond the board of directors.”
Shares in AMC dropped 10 percent on Monday after a mysterious document on social media claimed that regulators in China were warning state-run banks against financing overseas deals by Wanda. The credit-rating agency Standard & Poor’s put the Chinese parent company on negative credit watch.
After years of allowing some of its successful companies to take interests in sectors as diverse as movie theaters and yacht businesses, Chinese officials are attempting to clamp down on the conglomerates’ rising debt levels.
President Xi Jinping of China convened top officials in Beijing last week for a conference about financial overhauls, calling for limits on corporate indebtedness. And officials have increased scrutiny on some of China’s biggest global deal makers, including Fosun International and HNA.
The document that circulated on Monday appeared to show regulators telling the Agricultural Bank of China that it was forbidden to lend to six of Wanda’s overseas acquisitions, even if those ventures ran into difficulty raising money abroad. Two of the projects listed, deals to buy Carmike Cinemas and the Nordic Cinema Group, came under AMC Entertainment.
Commercial banks in China were also reviewing the credit risk of Sunac China Holdings after it agreed to buy a majority chunk of Wanda’s theme parks and 76 hotel projects, local news media cited the company’s chairman as saying on Tuesday.
Wanda is selling the portfolio to Sunac for $9.3 billion and plans to use the money to pay back loans, although it also aims to obtain a loan of about $4.4 billion on Sunac’s behalf.
Shares in Sunac, listed in Hong Kong, fell 7 percent on Tuesday. Its chairman, Sun Hongbin, was quoted by the state-run China Business Journal as saying that the firm had been communicating with its lenders and that it had “obtained the understanding of the commercial banks.” Sunac did not immediately respond to a request for comment.
Separately, Jiemian, another Chinese news website, reported earlier that a $220 million trust loan to Sunac had been suspended. Mr. Sun said the suspension targeted the entire real estate industry and not just Sunac.