HNA secures ‘investors’ for Hainan Air, airport business

Bloomberg

HNA Group secured strategic investors for its airline and airport businesses, a key step in the once high-flying Chinese conglomerate’s state-run reorganisation and bid to move beyond its debt woes.
The administrators of HNA’s restructuring program have decided to bring in Liaoning Fangda Group Industrial Co as strategic investor for the airline business and Hainan Development Holdings Co for the airport unit, exchange filings showed. The government of Hainan, the southern island province where HNA is based, took control of the conglomerate’s rescue last year.
“The fact that HNA has finally found strategic investors
months into its debt
restructuring process is significant progress to creditors,” Bloomberg Intelligence analyst Dan Wang said.
The restructuring aims to help Hainan Airlines Holding Co and HNA Infrastructure Investment Group Co reduce debt and improve profitability, the two companies said in their filings. There is still a risk of bankruptcy or delisting if their financial results don’t meet regulatory requirements, they said, without elaborating. They are two of HNA’s main businesses and have been hit by the coronavirus pandemic and its impact on travel.
“Long after the Hainan provincial government took over the group, there is finally progress,” said Ting Meng, senior Asia credit strategist at ANZ Banking Group Ltd.
“HNA’s airline and airport businesses are relatively high-quality so it’s not difficult to introduce strategic investment. But the group’s retail unit has yet to find a buyer and I think it will be more difficult,” she said.
The restructuring will likely involve options like debt-to-equity swaps and cash repayment, Meng said, adding that creditors will suffer losses but at least they will be out of the situation. HNA’s bonds are unlikely to bounce back, given that they’ve long priced in the conglomerate’s distress, she said.
HNA has approved at least 406 billion yuan ($63 billion) in debt claims while facing 1.2 trillion yuan of claims in total, people familiar with the matter said in June after the company’s first meeting with creditors.
The statements didn’t disclose how much the assets would be sold for.
Hainan Airlines’ shares slid 4.8% in Shanghai, their biggest drop in five weeks, while HNA Infrastructure tumbled 5%, the biggest loss since May 31.
Chinese airline stocks more broadly were also lower on Monday as Typhoon Chanthu approached Shanghai, leading to the cancelation of flights in and out of the financial hub. Juneyao Airlines Co fell as much as 9.1%, while Spring Airlines Co slid 7.7%. The Big Three of Air China Ltd, China Southern Airlines Co and China Eastern Airlines Corp also fell in both Shanghai and Hong Kong.
HNA hopes the restructuring plan will be approved by Chinese court before the end of October, Bloomberg News reported, citing people briefed by administrators. Hainan Airlines and HNA Infrastructure both plan to issue new shares to the investors.