Chinese regulations could curb outbound capital deals

Anbang

Over the last three years, China’s Anbang Insurance has spent more than $30 billion acquiring luxury hotels, insurers and other property assets—but those free-spending days may be coming to an end.

The Chinese government has reportedly forced the company to curtail its international purchases as Beijing strengthens curbs over capital outflows to prevent potential shocks to its financial system. This move has reportedly prompted 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, according to the Wall Street Journal.

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Anbang became a big player in hospitality real estate in 2014 when it purchased the Waldorf-Astoria in New York City for nearly $2 billion (the hotel is now closed for renovations and will likely become condos), and then gave Marriott a run for its money when it bid $14 billion on Starwood Hotels in early 2016. That deal fell through and Marriott acquired Starwood the following fall, but Anbang wasn't finished acquiring major hotel companies for big bucks. It spent $6.5 billion on Strategic Hotels & Resorts, and dropped another $2.3 billion for Japanese properties from Blackstone Group this year. 

In all, Anbang spent more than $12 billion on acquisitions in 2015 and 2016, according to Dealogic. Last year alone, outbound capital from China acquired some $246 billion in assets last year. 

But Chinese regulators have reportedly forced Anbang and other firms to pull back on investments over concerns about how the companies have funded their big purchases. 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. 

Anbang has made its fortunes by 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.

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

Overall, Chinese overseas investment has dropped—"sharply," according to reports—to $49.5 billion so far this year, about half of what companies spent last year at this time, according to Dealogic. 

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