Caixin
Nov 10, 2020 07:23 PM
BUSINESS & TECH

Struggling Wanda Film Raises $440 Million in Private Placement

Struggling cinema operator Wanda Film Holding Co. Ltd. is poised to raise 2.9 billion yuan ($438.2 million) in a private placement, as it looks to pay down debt and boost liquidity after posting losses for four straight quarters.

Shenzhen-listed Wanda Film will issue new shares to eight investors, including Shanghai Gaoyi Asset Management Partnership Ltd., UBS AG and Citic Securities Co. Ltd., the company said in a Monday filing (link in Chinese) to the Shenzhen Stock Exchange.

About 30% of the proceeds will be used to supplement liquidity and pay debt, while the rest will be used to build new cinemas, it said in another Monday filing (link in Chinese).

Upon completion of the private placement, Shanghai Gaoyi will become the company’s third largest shareholder with a roughly 4.7% stake, while Beijing Wanda Investment Co. Ltd. will remain the largest shareholder even as its holding shrinks four percentage points to about 41.5%.

The capital injection comes at a time when the Chinese cinema industry is struggling after the Covid-19 pandemic forced most theaters nationwide to close for sixth months.

Wanda chart-1

In the first three quarters, Wanda Film booked a net loss of about 2 billion yuan, down from an 829 million yuan profit in the same period last year, according to its latest quarterly report (link in Chinese). Its revenue shrank 72.3% to 3.2 billion yuan in the first three quarters, the report showed.

However, Wanda started losing money even before the coronavirus outbreak. It posted a 4.7 billion yuan net loss on revenue of 15.4 billion yuan in 2019, which was the company’s first annual loss in five years, according to its 2019 annual report (link in Chinese).

Wanda Film defended the large write-downs it made to the value of some of its assets last year and argued the loss was mainly due to a 5.6 billion yuan goodwill impairment, including asset impairment on the movie theaters it acquired over the past few years. In effect, Wanda Film declared the value of those theaters had fallen by 2.3 billion yuan.

In the first half of this year, Wanda Film shuttered 17 domestic theaters, according to its interim report (link in Chinese). As of the end of June, it directly operated 651 theaters around the world and owned about 5,700 movie screens, according to the report.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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