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Reuters

A unit of debt-laden Chinese conglomerate HNA Group is seeking to raise as much as US$1.5 billion by the end of this year in an investment fund that will serve as the group’s primary vehicle for global acquisitions, a document reviewed by Reuters showed.
The Overseas Aviation and Tourism Industry Fund will target travel, aviation and real estate assets around the world, according to the document.
HNA Aviation and Tourism Group is the division of the company that is behind the fund, the document showed.
The fundraising comes as the Chinese conglomerate is unloading assets and partnering with other companies as part of a wider reorganisation, sparked by mounting debts levels after announcing more than US$50 billion worth of global M&A deals over 2016 and 2017.
The group has traditionally made direct acquisitions, and that strategy has resulted in higher debt.
HNA also has been pushed back by regulators in several countries, concerned about its murky ownership structure.
Capital control restrictions placed by Chinese regulators in recent years have also been weighing on HNA’s deal activity.
The company has started to raise external capital for the fund this month, according to the document.
HNA’s aviation and tourism division and or its affiliates will be the general partner of the fund, with a group-related limited partner initially committing about US$100 million to US$150 million, it showed.
HNA is also trying to attract limited partners to invest at various stages.
HNA is guaranteeing to investors a minimum return of 8 to 10 per cent, calling that a competitive advantage, the document showed.
HNA Group in Beijing declined to comment for the story.
The fundraising plan indicates that HNA is looking to move away from using its own balance sheet to do deals – thereby reducing its risk profile – and instead adopt a model where institutional investors make significant contributions, the document showed.
And the fund will be based in an offshore location.
The Chinese aviation-to-financial services conglomerate’s restructuring includes selling overseas real estate and equity investments totalling more than US$10 billion in assets, such as stakes in Hilton Worldwide, Hilton Grand Vacations and Hilton Park Hotels & Resorts.
“This is in response to the Chinese government’s prohibition of future investments and concerns that their debt levels are untenable,” said Frank Turner, co-chair of law firm Osler’s Asia Pacific practice.
“They’re trying to protect their balance sheet,” he added.
HNA hopes that its aviation industry expertise will attract limited partners for the fund, the document showed.In recent weeks, HNA’s various units also have announced asset transfers and purchases as part of the reorganisation, which is expected to be completed in the first half of the year.
Seven of the group’s 17 listed units in mainland China and Hong Kong remain suspended.
HNA also announced at the end of February that it signed a deal to raise two funds totalling 20 billion yuan (US$3.17 billion) to focus on investments linked to China’s Belt and Road initiative.
The funds deal was signed with China Asia Pacific Assets & Property Rights Exchange Ltd.
On Monday, HNA Group said it will remain a “major investor” in Deutsche Bank, after the conglomerate reduced its stake in the German lender to 7.9 per cent, from about 8.8 per cent.


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Chinese offshore investment

HNA unit is creating US$1.5 billion war chest as group’s primary vehicle for shopping

The HNA logo is seen on a building in Beijing on February 18, 2016. Chinese conglomerate HNA will buy US technology distributor Ingram Micro for 6.0 billion USD, a statement said, the latest firm to snap up a foreign entity as part of Beijing's outward investment drive. Photo: AFP

HNA Group's buying spree. Swissport (cargo and aircraft ground handler) Reuters headquarters in London Tuniu Corp (Chinese online travel agent) Avolon Holdings (aircraft leaser) Ingram Micro (electronics distributor) Gategroup (airline caterer) Azul 23.7% (Brazil's third-biggest airline) CIT Group (aircraft leaser) US golf courses Hilton Group Kai Tak land ANZ Bank New Zealand's UDC Finance A stake in Deutsche Bank SCMP

Encumbered giant A buyout behemoth’s billions in pledged shares Value of shares pledged by HNA or its holdings (US$) Amount of shares pledged Company Year-to-date change in share price (%) 100% 100% 90% 98% 99% 78% 97% 100% 96% 100% 89% 8% 14% 7.5b 3.9b 3.2b 2.9b 2.9b 1.5b 0.8b 0.6b 0.3b 0.2b 0.2b 0.1b 0.1b Hilton companies* Deutsche Bank Hainan Airlines Holding CCOOP Group Tianjin Tianhai Investment HNA-Caissa Travel Group HNA Innovation HNA Investment Group HNA Infrastructure HKICIM Group HNA Holding Group HNA Group *Hilton Worldwide Holdings, Hilton Grand Vacations, Park Hotels & Resorts ** Hilton Worldwide Holdings 17% pledged by shareholders Sources: Company data, Bloomberg SCMP -25 -17 -15 -24 14 -23 -25 -23 -0.3 -4 -13 8 12** Hainan HNA Infrastructure Investment Group Bohai Financial Investment Holding

China’s civil aviation regulator orders HNA-backed airlines to settle their fuel bills

Fuel efficiency comparison of airlines Average fuel efficiency (pax-km/l*) Ranking Excess fuel/ pax-km (%) 1 1 6 10 13 13 13 13 19 20 Hainan Air China China Southern Cathay Pacific China Eastern Singapore Korean Air Qantas 30 30 30 30 26 22 36 36 33 32 31 Industry average 10 20 25 30 35 40 5 15 *Fuel efficiency is standardised at 35 passenger-kl per litre of fuel 9 13 20 20 20 20 38 64 SCMP

A Hainan Airlines aircraft taking off from the Sanya Phoenix International Airport in Sanya, Hainan province on May 1, 2015. Photo: REUTERS

China’s debt-laden HNA looks to sell more assets as pressure to repay debt weighs

After US$13 billion in sales at home and abroad in recent months, next on the block are reported to be office and hotel buildings in mainland China

The HNA logo on a building in Beijing. The conglomerate is under pressure to reduce debt and has been selling assets at a rapid pace. Photo: Reuters

China’s troubled HNA Group flips Kai Tak plots to Henderson Land for a profit of HK$1.7 billion

HNA Group, which paid HK$14.3 billion for the two plots at the site of Hong Kong’s former airport in Kai Tak, has sold it to Henderson Land for HK$16 billion 

HNA Plaza in Beijing. Photo: Reuters 

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