HNA Group, already facing bankruptcy, reveals nearly $10 billion was embezzled

HNA Group — the Chinese conglomerate that grew from Hainan Airlines into a global conglomerate that took stakes in hotel giant Hilton and Deutsche Bank — is heading for “bankruptcy restructuring on the demand of creditors after it struggled under a mountain of debt incurred during a spending spree that boosted its net assets to 1.2 trillion yuan ($171 billion) at its height.”

Other Chinese companies that have had humbling withdrawals from global acquisition splurges include Anbang Insurance Group, oil giant CEFC, Tomorrow Group, and Wanda. 

The scale of HNA’s budget crunch is hard to overstate:

• The company was $109 billion in debt “at the end of June 2019, the last bond report it made public that year showed,” Reuters reports.
• HNA currently owes tens of billions in outstanding bonds — $27.5 billion in various currencies — and $20 billion in loans, according to “data compiled by Dealogic,” Reuters separately notes. 
• The chairman and co-founder, Chén Fēng 陈峰, was even put on a Chinese government blacklist for untrustworthy debtors in September 2020 after HNA failed to pay multiple legal settlements. 

The latest news: Nearly “$10 billion had been embezzled” by shareholders, three units of HNA announced on January 29. 

• The revelation “sent shares in the listed HNA division tumbling,” the Financial Times reports, noting that both Hainan Airlines Holding Co. and CCOOP Group dropped “almost 10 percent, the daily limit for exchanges in Shanghai and Shenzhen.”
• “Bohai Leasing, which controls Ireland-based jet leasing company Avolon Holdings, fell 9.4% Shenzhen while logistics affiliate CWT International dropped by the same amount in Hong Kong,” Nikkei Asia adds. 

Which way for HNA?

HNA is “looking for private investors to help it emerge from bankruptcy,” per Reuters, but “bankers and analysts say restructuring may be challenging due to its debt pile and opaque corporate structure.”

• Caixin reported last week that “the financing tools such as trust lending and short-term notes used to fuel its rapid expansion make it hard to gauge HNA’s actual financial situation, and the company’s asset values could also be inflated by those financing tools.”
• “The whole bankruptcy restructuring process is expected to conclude within 2021,” Reuters says, citing a source that declined to be identified. 

But this goes far beyond HNA: Up to “500 companies linked” to HNA may “go into bankruptcy restructuring” as a result of the company’s crisis, a government-appointed working team says, Caixin reports.

See also:

• Hainan Airlines seen attractive to new investors despite HNA Group crisis / Reuters
• Factbox: China’s troubled HNA Group owns stakes in more than a dozen airlines / Reuters
• China’s falling star / The Wire China