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‘No bailout’ for troubled HNA Group

Contrary to speculation in the media, the Chinese government will not take over or bail out HNA Group, an authoritative source familiar with the matter told Yicai Global.

The decision came after the Hainan provincial government sent in a team to sort out the debt situation at the troubled aviation-to-financial services conglomerate, the source said.

At HNA’s request, Hainan sent a taskforce consisting of officials from the provincial government and the Civil Aviation Administration of China to help with its risk management, the Haikou-based group said in a statement. 

But its controlling structure will stay unchanged, and Chairman Chen Feng remains in place along with all other senior executives, the source said.

“HNA won’t be taken over and its flagship carrier Hainan Airlines won’t be split off,” he said in an interview.

The team dispatched will play a dual role of rescue and supervision, another insider said, allowing the government to channel necessary funding and asset merger services to HNA.

It will also enable the government to strengthen its supervision of the finances of the listed companies under the HNA Group.

The Hainan government will try its best to help this major local aviation group survive the crisis, the insider said.

HNA’s bedrock is in aviation. It set up Hainan Airlines in 1993 which went on to become one of the largest civilian-run air transport companies in China and the 10th-largest airline in Asia in terms of passengers carried, the report said. 

Through its subsidiary Hainan Aviation, the firm also controls a number of other local carriers, including Shanxi Airlines, Chang An Airlines and China Xinhua Airlines, the report said.

After 2000, the group diversified aggressively into several other industries including tourism, logistics and real estate. 

It went on a huge spending spree, acquiring multiple businesses both in China and abroad, including splurging US$40 billion on ritzy properties over six continents. It soon ran into liquidity difficulties and by 2017 had run up debts of US$94 billion, the report said.

The recent outbreak of novel coronavirus has only made matters worse, with the carrier reportedly unable to meet its current commitments. HNA has had to virtually suspend all its civil aviation operations as the epidemic has thinned passenger counts to a trickle.

The local government will also provide HNA with public services to mitigate any fallout from its debt crisis, people familiar with the matter said. For example, if there is any danger of repercussions, the government will promptly step in to protect the public interest.

“But the government will not commit to a bailout,” one person added. “Everything will be done according to the laws of the market.”


AF China Bond