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China’s Troubled HNA Said To Get $5.9bn in Strategic Investment

11 group entities – including flagship airline Hainan Airways – will get a cash injection and be put into one company in a bid to reduce debt, sources say

The HNA Group logo is seen on the HNA Plaza in Beijing in this photo from February 2018 by Jason Lee, Reuters.

 

China‘s HNA Group will receive strategic investment of 38 billion yuan ($5.88 billion) after its restructuring, which will go to eleven of its entities including its flagship carrier Hainan Airlines, two sources said on Monday.

Gu Gang, the group’s party secretary and leader of the government-led working group addressing HNA’s liquidity issues, disclosed the investment at a meeting of its creditors, the two sources who were familiar with the meeting’s discussions told Reuters. He did not elaborate on where the investment was coming from.

Eleven entities that are part of the embattled conglomerate, including its flagship airline Hainan Airlines, were due to hold a creditor meeting on Monday, according to a document detailing its debt restructuring plan.

Under the plan the 11 entities will be reorganised as a group and most of their liabilities will be reduced via debt-to-equity swaps and shareholder repayments. A restructuring was proposed earlier this year.

Creditors of the entities have reported that they are owed 397.2 billion yuan ($61.4 billion) of unpaid debt. Only 161.29 billion yuan of this has been recognised by the court and will enter the restructuring process.

Unsecured creditors who are owed no more than 100,000 yuan ($15,465.01) in principal debt will be repaid in full. Any debt above that level will be paid partly by HNA and other parties, and partly in Hainan Airlines’ shares, according to the document.

The creditors’ committee still must approve the plan, the document said.

 

POLICE DETENTION

HNA was placed in bankruptcy administration in February and a working group created by the government of its home province of Hainan has been addressing the company’s liquidity problems.

Late on Friday, the company said its chairman and chief executive had been detained by Chinese police over suspected criminal offences.

HNA has said that it would be reorganised into four independently operated sections, including ones for aviation and financial business, and that all equity held by its old shareholders would be wiped out.

In the 2010s HNA Group used a $50bn global acquisition spree, mainly fuelled by debt, to build an empire with stakes in businesses from Deutsche Bank to Hilton Worldwide.

But its spending drew scrutiny from the Chinese government and overseas regulators. As concerns grew over its mounting debts, it sold assets such as airport services company Swissport and electronics distributors Ingram Micro to focus on its airline and tourism businesses.

 

• Reuters with additional editing by Mark McCord 

This report was updated on Sept 27.

 

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Mark McCord

Mark McCord is a financial journalist with more than three decades experience writing and editing at global news wires including Bloomberg and AFP, as well as daily newspapers in Hong Kong, Sydney and Melbourne. He has covered some of the biggest breaking news events in recent years including the Enron scandal, the New York terrorist attacks and the Iraq War. He is based in the UK. You can tweet to Mark at @MarkMcC64371550.

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