(Yicai) Dec. 23 -- Wanda Group has no contractual obligation to repurchase CNY9.5 billion (USD1.3 billion) of a unit's shares from Sunac Group, another cash-strapped Chinese developer, following an alleged breach in an investment deal, according to an insider.

Sunac has no contractual basis for seeking the equity repurchase, as no so-called bet-on agreement was included in the contract, the source at Wanda said, adding that Sunac’s demand is therefore without foundation.

A bet-on agreement, also known as a Valuation Adjustment Mechanism agreement, is a contractual arrangement between parties that typically requires the obligated party to meet specific milestones by a set date. If unmet, these clauses often trigger financial consequences for the obligated party.

Sunac filed for arbitration of the matter with the China International Economic and Trade Arbitration Commission in January and a case was opened in March, the person said. A decision is expected soon.

The case results from a January 2018 deal in which Sunac, Suning.Com, Tencent Holdings, and JD.Com invested CNY34 billion (USD4.6 billion) in Dalian Wanda Commercial Management Group in return for a 14 percent stake on the premise that Wanda would soon take the unit public, The Paper reported on Dec. 19. Sunac spent CNY9.5 billion for a 3.9 percent shareholding.

The parties signed a bet-in agreement that the unit would be listed on the stock market before Oct. 31, 2023, but this has yet to happen, The Paper said, citing people familiar with the matter.

Both Sunac and Wanda are in financial difficulties. In the first half of the year, Tianjin-based Sunac reported a net loss of CNY15 billion after revenue slumped 41 percent to CNY34.3 billion.

Wanda has recently secured new investors, logging net profit of CNY4.8 billion and revenue of CNY26.9 billion in the first half. However, it had CNY69.1 billion of non-current liabilities due within one year and cash reserves of around CNY10.5 billion as of June 30.

Editor: Futura Costaglione