Amid government scrutiny, Anbang’s investments stall

Plans for an international bond sale, stock market listing have faltered

TRD New York /
Jun.June 02, 2017 08:39 AM

Anbang’s Wu Xiaohui and the Waldorf Astoria

China’s Anbang Insurance TRData LogoTINY catapulted onto the scene with multibillion-dollar foreign deals over the past three years. But as it stares down government scrutiny of its high-yield insurance products, the insurer has been forced to hit the brakes, prompting plans for an international bond offering and stock market listing for its life insurance business to falter.

Regulators, who banned two of Anbang’s products last month, have also barred the company from obtaining approval for new products for three months, the Wall Street Journal reported.

“Anbang is already slowing on long-term investments that might not be liquid,” Julian Lin, analyst with Shanghai-based consulting firm Z-Ben Advisors, told the Journal. “How its business plays out will still need to be monitored.”

An Anbang spokesperson said the company isn’t facing any more scrutiny than its peers, and it is focusing on more traditional insurance offerings in response to regulators’ guidance. Last month, the company dismissed rumors that Chairman Wu Xiaohui had been detained by government regulators. On Friday, the Financial Times reported that the Chinese government will not allow Wu to leave the country, though Anbang denied the claim.

The company — which spent more than $12 billion on acquisitions in 2015 and 2016, according to Dealogic — shot to prominence after buying Strategic Hotels & Resorts for $5.5 billion in March 2016 and then bidding $14 billion on Starwood Hotels within a few days (it later backed out of that deal). It snagged the Waldorf-Astoria for nearly $2 billion in 2014, and now plans to convert part of the iconic hotel to condos.

But Chinese regulators have forced Anbang and other firms to pull back on investment, concerned about how the companies have funded big purchases.

For Anbang, a key moneymaker has been selling high-yield products to consumers, two of which were banned last month. Before that, new sales of high-yield products rose to $5.8 billion in March 2016, 48 times higher than the year prior.

Analysts believe some of Anbang’s new assets, including the Waldorf-Astoria, could be hard to sell if the company needs to raise cash quickly.

While dealmaking hasn’t stopped — Anbang paid $2.3 billion for Japanese properties from Blackstone Group this year — it’s pulled out of major deals twice in recent months, including a $1.6 billion deal to purchase Fidelity & Guaranty Life as well as an opportunity to invest in Kushner Companies’ 666 Fifth Avenue.

Overall, Chinese overseas investment has dropped sharply to $49.5 billion so far this year, about half of what companies spent last year at this time, according to Dealogic. [WSJ] — E.B. Solomont

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