Avolon owner HNA plans $16bn of as­set sales as in­vestors fret

Irish Independent - Business Week - - BUSINESSWEEK - John Mul­li­gan

HNA, the Chi­nese con­glom­er­ate that con­trols Dublin-based air­craft lessor Avolon, is re­port­edly eye­ing $16bn (€12.8bn) in as­set sales dur­ing the first half of 2018 in or­der to pre­vent a liq­uid­ity squeeze.

The group has spent bil­lions of dol­lars in re­cent years buy­ing stakes in busi­nesses such as the Hil­ton ho­tel group and Deutsche Bank.

There’s no in­di­ca­tion yet as to what as­sets HNA might off­load, ac­cord­ing to news agency Bloomberg.

Its stock mar­ket-listed Bo­hai Leas­ing sub­sidiary com­pleted the ac­qui­si­tion of Avolon in 2016, in a deal that placed a $7.6bn (€6bn) en­ter­prise value on the lessor.

Avolon – the world’s third big­gest air­craft lessor – was co-founded by Clare na­tive Domh­nal Slat­tery in 2010 and had floated on the New York Stock Ex­change just months be­fore Bo­hai of­fered to buy it.

HNA owns 52pc of Bo­hai Leas­ing. Last year, Avolon com­pleted the $10.3bn ac­qui­si­tion of the leas­ing as­sets of CIT.

Last week, a se­nior JP Mor­gan ex­ec­u­tive claimed that Avolon’s bond rates were “not com­pet­i­tive” and “un­sus­tain­able” be­cause of HNA’s is­sues.

“They [Avolon] need com­pet­i­tive bond mar­ket ac­cess and at the mo­ment their rates are not com­pet­i­tive given the prob­lems with HNA,” said JP Mor­gan man­ag­ing di­rec­tor Mark Streeter, speak­ing at the Global Air­fi­nance Con­fer­ence in Dublin.

But the fol­low­ing day, Mr Slat­tery moved to dis­miss con­cerns.

“There’s been a lot of noise in the past day or two about Avolon’s bonds,” he said. He pointed out that the price of Avolon’s bench­mark bond, which ma­tures in 2022, has tight­ened 13pc in the pre­vi­ous five trad­ing days, and that the yield on the bond has tight­ened by 22pc.

“That tells me, as chief ex­ec­u­tive of the busi­ness, that the bond mar­ket can be quite volatile and re­ac­tive to head­line news,” he said, adding that Avolon has ac­cess to “mul­ti­ple” debt mar­kets.

He also said that Bo­hai Leas­ing is legally pro­hib­ited from pro­vid­ing any share­hold­ers loans, “or any loans” to HNA.

As of last June, HNA had amassed $190bn (€152.3bn) of as­sets. The group also held al­most $30bn (€24bn) of share­hold­ings, ac­cord­ing to data com­piled by Bloomberg. Real Cap­i­tal An­a­lyt­ics es­ti­mates HNA owns more than $14bn in global real es­tate.

HNA had 185.2bn yuan (€23.6bn) of short-term debt, more than its cash and earn­ings can cover, at the end of last June. Bor­row­ing costs for the con­glom­er­ate have risen since then amid in­vestor con­cerns. (Ad­di­tional re­port­ing: Bloomberg)

Avolon, co-founded by Domh­nal Slat­tery, is con­trolled by HNA

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