China’s HNA Group cuts stake in Deutsche Bank
Move comes two months after saying it wouldn’t do so
FRANKFURT: HNA Group Co, one of Deutsche Bank AG’s biggest shareholders, cut its stake in the company two months after saying it wouldn’t as the Chinese conglomerate tries to raise US$16bil to deal with financing problems at home.
HNA, which shot to international prominence by spending more than US$40bil on acquisitions across six continents since 2015, reduced its holding in the German lender to 7.9% from 8.8% as it allowed portions of a complex derivatives arrangement to expire, according to a filing.
The move follows a string of negative developments at Deutsche Bank, including a tumultuous management revamp and the inadvertent transfer of 28bil (US$35bil) to one of its outside accounts, which Bloomberg News reported last Thursday.
For HNA, the transaction comes soon after it unloaded its stake in Hilton Worldwide Holdings Inc, the biggest disposal in a purge that’s resulted in the once-acquisitive Chinese group selling more than US$12bil in assets this year. The company, which is said to have told creditors that it planned to dispose of about US$16bil in assets during the first half, still has billions of real estate assets up for sale.
HNA said it’s still committed to remain a “major investor” in Deutsche Bank. That’s the same language the Chinese company used in mid-February when it lowered its stake from about 9.9% and said no further cut was planned. The decision was made “due to the current market environment,” a spokesman said by e-mail on Saturday.
Much of HNA’s interest in the German bank is held through derivatives contracts, with agreements involving 65.5 million Deutsche Bank shares scheduled to expire in various batches by July 20, according to a filing last year.
HNA bought its shares in Deutsche Bank last year when it was trading between 14.70 and
17.67 each but as the stock tumbled to below levels reached during the depths of the global financial crisis, the Chinese company reduced its stake by exercising its option to sell the German lender’s shares at 15 apiece, limiting its losses, according to regulatory filings.
HNA doesn’t generate enough profit to cover its interest payments and its short-term debt soared to more than 185 billion yuan (US$29bil) in the first half of 2017, exceeding its cash reserves. It also postponed a planned share sale in its aircraft ground-handling company Swissport Group, roughly two weeks after abandoning a similar plan for its Swiss airline caterer, Gategroup Holding AG.
Deutsche Bank shares have fallen 27% this year. The only company that has performed worse on the Bloomberg Banks &Financial Services Index is Banca Monte dei Paschi di Siena SpA, which was rescued by the Italian state.
A weeks-long leadership tussle at Deutsche Bank claimed the scalps of chief executive officer John Cryan and two of of his top lieutenants and prompted widespread criticism of chairman Paul Achleitner for his handling of the matter. The transfer error happened after Cryan had tried to improve controls that had failed the lender in the past. — Bloomberg