HNA’s planned sale of Hilton stake to bring total asset disposal to nearly US$13 billion
The embattled Chinese conglomerate has so far dumped US$6 billion of assets including a Sydney property, land sites in Hong Kong and part of a stake in Deutsche Bank
HNA Group, the debt-ladened conglomerate under China’s regulatory spotlight, plans to potentially unload its entire US$6.5 billion stake in Hilton Worldwide, adding to the US$6.2 billion of domestic and foreign assets it has dumped this year to repay its excessive borrowings.
HNA “has determined to pursue a sale of some or all of the common stock” that it currently holds in Hilton Worldwide, the US company said in a filing to the Securities and Exchange Commission on Thursday.
Currently, HNA owns 26.1 per cent of Hilton, one of the world’s largest hotel operators, which was worth US$6.5 billion in value by Thursday’s market close in the US.
The Chinese company did not respond to a request for comment on Friday afternoon.
HNA bought the stake in Hilton in 2016 from its biggest shareholder, the US private equity firm Blackstone Group for US$6.5 billion. Later that year, Hilton Worldwide split into three independent units – real estate business Park Hotels and Resorts, timeshare business Hilton Grand Vacations and Hilton Worldwide – giving HNA stakes in each unit.
Last month, HNA sold its stakes in Park Hotels and Resorts and Hilton Grand Vacations for US$1.4 billion and US$1.14 billion separately.
While a successful sale of the Hilton Worldwide stake could generate handsome returns for the Chinese firm, it would be far from adequate to address the liquidity crunch.
In the first 11 months of last year, the Hainan-based company saw its short-term and long-term debt – including bank loans and bonds – reached 637.5 billion yuan (US$101.1 billion), up 36 per cent from a year earlier, according to an HNA filing. That was about 42 per cent more than the 2017 gross domestic product of 446.3 billion yuan for Hainan province.
HNA has been planning massive job cuts and accelerating the sale of overseas assets, as the Chinese authorities crack down on Chinese companies’ offshore investments, particularly in real estate, hotels, and movie studios. Various publicly available records showed that it has sold more than US$6 billion worth of domestic and foreign assets so far this year.
The assets were part of an overseas portfolio worth US$50 billion, according to a Reuters report, which it had built up in the past three years.
In January, it sold an office building in Sydney to Blackstone for A$205 million (US$165 million at January’s exchange rates), a property that it paid A$117 million for in 2012.
In February, the firm cut its stake in Deutsche Bank from roughly 10 per cent to 8.8 per cent, for a combined €300 million (US$3745 million at February’s rates).
Also in the same month and in March, HNA sold three land plots in Hong Kong for a combined HK$22.36 billion (US$2.81 billion), according to filings to the Hong Kong stock exchange.
In March, an HNA unit sold property and logistics assets in Hainan province to Sunac China Holdings, controlled by tycoon Sun Hongbin, for 1.93 billion yuan (US$305 million at March’s rates).
Currently, HNA is seeking other funding avenues, such as a planned listing for its Swiss cargo handler Swissport and the sale of its majority stake in Spain’s NH Hotel Group.