HONG KONG • Concern is growing about HNA Group, once the poster child for China's debt-fuelled overseas acquisition spree, after one of the airlines it backed almost collapsed and trading in some of its bonds was halted.
HNA shot to prominence between 2016 and 2017 after spending over US$40 billion (S$54.4 billion) on acquisitions across six continents. The once little-known airline operator became the biggest shareholder of iconic firms such as Hilton Worldwide Holdings and Deutsche Bank as well as paying top dollar for high-end properties from Manhattan to Hong Kong.
But the buying spree attracted scrutiny on things such as its opaque ownership structure. Eventually, its spiralling debt caught up with the group and prompted an equally dramatic selling spree. On top of that, the group's co-chairman suddenly died last year, exacerbating the conglomerate's crisis.
Once among the most ambitious and acquisitive Chinese private firms, HNA has since come under pressure from Beijing to sell off assets amid concerns that the group's borrowing spree could pose a systemic risk to China's economy.
HNA has periodically been in the news in recent years for missing payments, selling assets and struggling with debts that climbed to as high as 598.2 billion yuan (S$117 billion). In September, an airport backed by HNA units, Haikou Meilan International Airport, failed to make good on a US$200 million bond due on Sept 6.
Further signs of stress have emerged in the past week: the near-collapse of HNA-backed Hong Kong Airlines, which narrowly avoided losing its licence to fly, and the group suspending a bond because of an unspecified "major" event. HNA declined to comment on both events beyond its public statements.
Trading on HNA's 10-year 7.6 per cent 1.3 billion yuan bond has been halted from Dec 6 till the maturity date of Dec 24, the company said in a filing, though it did not elaborate on the reason for the pause. Separately, Blue Skyview said on Sunday that its perpetual security linked to Hong Kong Airlines will be suspended until further notice.
HNA remains one of China's biggest conglomerates. It reported total assets of about US$139 billion and debts of US$75 billion in its latest financial report - the first half of this year - meaning the group has the scale to roil Chinese markets. The group is still vulnerable, with short-term debts exceeding its cash, equivalents, short-term investment and earnings.
"HNA appears surprisingly reluctant to sell off more assets to pay down its debt, perhaps because it is concerned about 'fire sales' at low valuations," said Mr Andrew Collier, managing director at Orient Capital Research. "Whether the company survives is unclear but it is certainly attempting to keep its financial situation from completely collapsing."
BLOOMBERG
