HNA yet to gain investors’ trust
HONG KONG: Though HNA Group Co managed to reduce one of China’s biggest debt piles by selling off dozens of assets, the embattled Chinese conglomerate will probably need to get much slimmer before regaining the trust of investors.
Total debt fell 9.5 per cent to 541.6 billion yuan (RM324.69 billion) at the end of June, down about US$8.3 billion from a record set at the end of last year, according to figures derived from a half-year report dated Friday. It was the first time the number had fallen, data showed.
The lighter load may ease the pressure on HNA, which is seeking to recover from a binge that involved borrowing tens of billions of dollars to fund purchases ranging from big stakes in Deutsche Bank AG to skyscrapers in Manhattan. But debts remain high and the results weren’t enough to shake off concerns about the company.
“The improvement does not appear material enough and management perhaps needs to do more,” said Warut Promboon, managing partner at credit research firm Bondcritic Ltd. “Asset sales are a good step in the right direction.”
The company, along with the likes of Dalian Wanda Group Co and Anbang Insurance Group Co, is now reversing course after spearheading an unprecedented shopping spree of high-profile assets worldwide, which ultimately drew the ire of the Chinese government amid concerns about unsustainable debt levels.
HNA has sold more than US$17 billion in assets this year — much of it coming from the sale of its holdings in Hilton Worldwide Holdings Inc and its spinoffs — according to a Bloomberg tally.
More disposals are on the way after the firm agreed to unload billions of dollars worth of shares in Avolon Holdings Ltd and the Radisson hotel chain. HNA was also seeking to sell buildings across America, London and China, said sources.
In another tailwind, China’s leaders were said to have agreed in June for the government to help HNA raise funds as long as the firm sells out of non-core industries, stops diversifying through acquisitions and sticks to its main travel business.
“I am optimistic they can improve their financial situation,” said Andrew Collier, managing director at Orient Capital Research. “HNA’s total debt is likely to decline due to asset sales. They also are getting significant support from Chinese banks, which will support their working capital.”
Yet challenges abound. HNA is still burdened with one of the largest interest expenses in the world. The payments, which it reduced by 7.4 per cent from a record set the previous semester, ranked as the highest among non-financial firms in Asia, according to data compiled by Bloomberg as of Saturday. HNA also ranked No. 1 in Asia last year.