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Paramount’s China Partner Huahua Has Ties to Distressed Lender, Unclear Chairman Picture (Exclusive)

”There’s something very strange there,“ an individual with knowledge of the studio’s prospective slate-financing deal tells TheWrap

Huahua Media, the Chinese film company that recently agreed to a $1 billion slate financing deal with Paramount Pictures, has said a prominent businessman with a reputation for making unclear statements about his business interests is its chairman — amid confusion over how long he has been in that role — and become involved with a distressed lender as it scrambles to deliver that funding, TheWrap has learned.

In a statement provided to TheWrap Monday, Huahua said that its chairman is Hong Kong businessman Kenny Huang, who has a relationship with former Paramount vice chairman Rob Moore. The company also announced that it had become involved in a financial joint venture through collaborator Oriental Times Media with an affiliate of China Huarong Asset Management Company, a state-owned lender that specializes in distressed situations.

An individual with knowledge of the deal told TheWrap it wasn’t unusual for a Chinese company to commit to funding something and then syndicate it out to investors quietly, which he said was the case for the Paramount slate deal — but Huang couldn’t line up the capital commitments. He also said the involvement of a distressed debt firm in this type of arrangement was “super weird.”

Last week, TheWrap exclusively reported that regulatory issues had postponed Oriental Times Media’s proposed $158 million purchase of Huahua — a move that could threaten the Paramount slate deal, the individual told TheWrap.

Huahua CEO Wang Kefei said the deal was “progressing as planned” in the statement, which also mentioned a “multi-channel and multi-layered financial joint venture for television programs and features” that Oriental Times Media had agreed on with China Huarong Asset Management Company. The individual provided TheWrap with information that indicates Huahua itself is a party to those deals with Huarong Xinxing Asset Investment Company, a subsidiary of China Huarong.

The statement also identified Huang as Huahua’s chairman and founder, a role which had not been previously reported and contradicted a joint January statement from Paramount, Huahua and Shanghai Film Group announcing the slate financing deal, which named Wang as Huahua’s chairman. A second individual with knowledge of Huahua and Paramount’s relationship said Huang was the key figure in connecting the two and is indeed Huahua’s chairman at this point in time. An individual close to Huang said he has been chairman of the company for four years.

Huahua did not initially respond to questions about Huang’s role at the company and the nature of its involvement with China Huarong Asset Management Company. Paramount parent Viacom declined to comment.

NOTE: After this article was published, Huahua provided a statement to TheWrap blaming the chairman confusion on an incorrect press release and saying that Huang has been chairman for the past four years.

“Reserving comment on your story regarding Huahua Media today we wish to advise you that Kenneth Huang was a founder and has been the Chairman of Huahua Media continuously for the past four years,” the statement said. “At no time during these four years has any other person been the Chairman of Huahua. The press release issued by Paramount January 19, 2017 inadvertently referred to Wang Kefei as Chairman. He has been and remains CEO of Huahua Media. Both Mr. Huang and Mr. Wang have held these respective positions continuously for a number of years and there have been no changes in these positions for years. We would appreciate correcting your story to reflect these facts.  We apologize for any confusion the incorrect press release may have caused.”

Huang was the CEO and co-founder of Hong Kong-based QSL Sports Limited, an investment services company focused on sports which ceased operations years ago. He implied ownership of 15 percent stake in the NBA’s Cleveland Cavaliers with a confusing response to an interview question he possibly misunderstood, but the league denied he had any ownership in the team. Huang had represented a Chinese group interested in acquiring a stake in the team, but that deal was not consummated after delays with owner approvals and the Chinese partner’s decision to move on, an individual with knowledge of the deal told TheWrap.

And he was involved in a failed bid to buy venerable soccer team Liverpool FC. Huang led a group that identified China Investment Corp., China’s sovereign wealth fund, as a potential investor in the deal — but CIC denied any involvement with the deal. An individual with knowledge of that deal said word of CIC’s involvement got out before the arrangement was fully completed, which was why it fell apart.

Huang was also sued by former business partners in Florida in 2010 over a deal to import cars. He won the case and was awarded $300,000 in costs and damages, but some of his statements made under oath about his relationship with the Cavaliers and China’s Bank of Communication were not technically true. The individual close to Huang said a language issue may have been the cause for that — Huang said under oath in the Florida case that English was his fourth language.

The two individuals with knowledge of the Huahua-Paramount deal described Huang as a person of questionable reputation, the first calling him someone “who has positioned himself in the past as something he’s not.” That individual also said Huang being represented as Huahua’s chairman in official communications is new, despite the individual close to Huang insisting he has occupied that role for four years.

But even with the joint venture with Huarong, the first individual said the slate-financing deal remains in jeopardy. A third individual with knowledge of the deal said one of the concerns was Viacom’s recent decision to dedicate part of Paramount’s film slate to co-branded movies with Viacom’s other brands, such as Nickelodeon and MTV. But China’s crackdown on cash leaving the country — regulators have to approve amounts of more than $5 million — and increased scrutiny of high-dollar entertainment deals have also put the squeeze on the firehose of cash that had been flowing between China and Hollywood, most notably killing Dalian Wanda Group’s planned $1 billion purchase of Dick Clark Productions, as TheWrap exclusively reported.

The Wall Street Journal reported Thursday that Viacom CFO Wade Davis, who has taken on a more involved role at Paramount since longtime studio boss Brad Grey’s departure, is currently in China meeting with executives from Huahua and co-financier Shanghai Film Group to work on the slate deal.

The first individual said it is unusual that Huahua or Oriental Times would work with a lender like Huarong. He questioned why Viacom would want any kind of relationship with a distressed lender since it might have to disclose that to shareholders, which would be more unwelcome news coming from a company that’s been in transition for much of the last year. (Viacom named Bob Bakish as its new CEO last fall and is still looking for Grey’s replacement — with former Fox Filmed Entertainment boss Jim Gianopulos reported to be in pole position.)

“There’s something very strange there, for sure,” the individual said.

However, China has been a bright spot for Paramount — largely with Huahua’s help. Huahua’s marketing might helped “Transformers: Age of Extinction” march to a then-record $320 million at the Chinese box office in 2014, and Huahua and Shanghai Film Group invested in and helped push “xXx: Return of Xander Cage” to $162 million in China, more than $100 million higher than the film’s U.S. gross.