Hainan Airlines calls bondholders for meeting on plan to defer debt repayment amid liquidity squeeze
- Conference call with creditors to be held on April 10 related to a 750 million yuan (US$106.4 million) bond due on April 17
- Company said Covid-19 outbreak has caused flight, cargo revenue slump in February amid border closures, travel bans
Hainan Airlines is calling a meeting with bondholders this week to seek a delay in repayment, citing tight liquidity as the coronavirus pandemic slammed travel and carriers worldwide.
The airline, part of the debt-stricken HNA Group, is holding a conference call at 2pm local time April 10 with holders of its 750 million yuan (US$106.4 million) 4.35 per cent bond, according to a Shanghai Clearing House filing on Tuesday. The 270-day bond matures on April 17.
Revenue has dropped significantly due to the Covid-19 outbreak, the company said in the filing. Debt repayment pressure has been relatively high in the past two years and the company is likely unable to repay the short-term notes and hopes to extend the repayment, it added.
The carrier’s financial crunch adds to a long list of troubles faced by its parent company as ambitious debt-funded expansion plans in the past five years turned sour. The pandemic has only brought the industry to the precipice, with some carriers grounding more than 90 per cent of capacity amid border closures and travel bans.
The global aviation industry is expected to suffer more than US$252 billion of losses, with carriers in Asia-Pacific taking a US$88 billion hit, according to an industry organisation. Including ancillary sectors, the damage could surpass US$2 trillion this year, a think tank said.
Hainan Airlines said passenger volume slumped 64.8 per cent year over year in February to about 5.09 million, while freight volume shrank 39.2 per cent to 51,200 tonnes (56,400 short tons). Both capacities fell by about 60 to 62 per cent.
Hainan Airlines said bondholders were given proposals on payment extension on Tuesday, with replies on the proposals on the same day. Shanghai Pudong Development Bank, which managed the bond sale last year, will send the final version of the repayment plan on Wednesday, it said in the filing.
US$2 trillion loss estimated for aviation-related industries worldwide from coronavirus pandemic, think tank says
HNA Group announced in February that its liquidity will be managed by a working committee in a sign the government may be running out of patience about the debt bomb, which at its peak in 2018 amounted to US$108 billion.
The committee has representatives from the provincial government, civil aviation administrator and China Development Bank.
HNA Group has been in talks to sell some of its assets, including its stake in Hong Kong Airlines to no avail because of valuation issues, among others. That is likely to have worsened amid the pandemic.
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