Dalian Wanda Group faces challenge in Australia to stop asset sales

Written by By Jen Ryan, CNN A Hong Kong-based firm that has dominated the South China Sea since the 1940s is facing a lawsuit in an Australian court, where it’s attempting to suspend Ottawa’s…

Dalian Wanda Group faces challenge in Australia to stop asset sales

Written by By Jen Ryan, CNN

A Hong Kong-based firm that has dominated the South China Sea since the 1940s is facing a lawsuit in an Australian court, where it’s attempting to suspend Ottawa’s order to divest.

Dalian Wanda Group has been embroiled in controversy over its portfolio of investments since the government in July launched a review of the Conservative government’s 2016 decision to direct foreign buyers to sell their crown jewel, the Canadian pension fund Caisse de depot et placement du Quebec’s (CDPQ) interests in shopping mall developer RioCan REIT.

The review is targeting Wanda because the U.S. firm is controlled by Chinese group Wang Jianlin. It’s not uncommon for China’s government to apply pressure, often through bankruptcy filings, on conglomerates deemed not to have the best interest of China in mind.

According to the Globe and Mail , the Canadian court ruled in the company’s favor in November, after obtaining more information from the Department of Foreign Affairs, Trade and Development.

The federal government’s Disinvestment Policy Act limits the sale of pension fund and investment fund interests to non-Canadian firms that meet certain criteria; many government institutions, including the Federal government and International Financial Institutions (IFIs), have adopted the policy.

More than $102 billion in foreign investment is currently under review, as the government looks to divest its holdings, according to the Canadian Broadcasting Corporation .

Vancouver-based Law Enforcement Consulting Group, which has specialized in corporate insolvency in Australia since 1991, is looking to “move the ball down the field” and extend the process of legal action against Wanda.

It’s no coincidence the company is filing suit while it has a week to appeal the court decision, according to Law Enforcement Consulting Group’s Maurice Perlak. The company has claims pending in Australia over a UK-based Chinese firm, Acarous Capital Management, which has billions invested in the region.

At issue are alleged loans made by Wanda to certain funds, including Perpetual Australian Holdings Pty Ltd., which provided Wanda with $1.8 billion in 2015.

“We have argued that Wanda did not provide proper due diligence on the Australian entity … and we said the financing activity is not in the best interests of the Australian people,” Perlak said in a phone interview.

Wanda doesn’t hold a large equity stake in the Australian company, but according to Perlak, it owns less than 1% of Perpetual’s equity. “We are accusing the company of being owed $3.7 billion.”

An attorney for Perpetual says the company was “completely blindsided” by its investment in Wanda, and hired Australia’s PPB Advisory to conduct an independent valuation in January 2016. According to PPB, it found that the firm had serious financial challenges and was unlikely to meet its funding obligations in the near future.

Perpetual made the investment after it was represented by Edgar Pfeffer, an Israeli who subsequently stated he wasn’t following the advice of PPB.

Mr. Pfeffer was not available for comment, however, PPB’s executive director, Michael Harvey, believes he understood the investment well. “He was well-educated about Chinese and Australian commercial investments, he was regularly quoted, and he was quite a confident person.”

Mr. Pfeffer did not immediately return requests for comment by CNN.

Perpetual asked for the matter to be dismissed in November, but the court said it will consider the case in the next three weeks. The trial itself is expected to last four weeks.

Australian government likely to suspend its investment policy. “We’ve got no immediate plans to suspend this policy at this stage,” Perlak said. “So, we would prefer to delay.”

He said that Dalian Wanda “has not done anything very well” and has been bailed out by other companies in the past, but that now the government’s support is shaky.

“What we’re finding is that there’s a high level of concern that ‘this was just the beginning of the story,’ ” Perlak said. “The public in Australia and Canada certainly have no faith in Wanda anymore.”

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