High-flying HNA Group comes back to earth as scrutiny hits dealmaking
BEIJING: HNA Group, the highflying Chinese conglomerate caught in the cross- sights of Beijing, has hit turbulence as deals stall and scrutiny of its finances and shareholding structure intensifies.
Beijing’s clampdown on highlyleveraged foreign investment has led to more regulatory scrutiny around the world, putting the brakes on a remarkable period of growth that saw HNA announce US$50 billion of acquisitions in just over two years.
New deals have dried up and investment banks like Goldman Sachs and Bank of America Merrill Lynch have grown wary of working with the company that has sprawling interests in aviation, logistics and tourism.
HNA’s long-term strategy of debt-fuelled growth, which peaked with its purchase of stakes in Hilton Worldwide Holdings and Deutsche Bank, is fraying, compounding the company’s problems as it struggles to allay concerns over its opaque shareholding structure.
A plan to publicly list Pactera, a Chinese technology services company HNA bought last year, was suspended this month after Goldman Sachs said the deal failed to meet its internal due diligence requirements.
HNA has defended its health, saying it maintains strong working relationships with more than 300 financial institutions and has a healthy line of credit.
“A lot of the stuff going on in the media is just perception, and that perception doesn’t accurately reflect our business,” said Guang Yang, chief investment officer of HNA Capital, the company’s financial arm.
“Our business continues to be very strong.” HNA bonds have dipped slightly since the extent of Beijing’s crackdown on debt became clear.
Two bonds from HNA Group and Hainan Airlines due in 2018, for instance, are being bid at under 99 cents on the dollar, versus around 100 in June.
Finance costs have soared to 14.19 billion yuan in the first half of 2017, from 6.47 billion yuan in the yearearlier period, as HNA completed acquisitions and utilized 454.5 billion yuan in credit.
Shareholder equity now finances 40 per cent of 1.21 trillion yuan in total assets, with the rest coming from borrowed funds, after stakeholders injected 488.5 billion yuan into the company last year. — Reuters