HNA Group

Temasek, others to buy Hainan Airlines stake for US$1.1 billion

Parent firm HNA says it plans to use the new funds to expand its operations by buying aircraft and support six other projects, such as pilot training, engine maintenance and training facilities

PUBLISHED : Monday, 11 June, 2018, 4:20pm
UPDATED : Monday, 11 June, 2018, 10:28pm

Hainan Airlines Holding plans to raise as much as 7 billion yuan (US$1.1 billion) by selling shares to a group of investors, including an arm of Singapore state investment company Temasek Holdings, as part of a restructuring planned by the unit of Chinese conglomerate HNA Group Co.

The Hainan-based carrier is selling up to 20 per cent of its Shanghai-listed shares to 10 investors.

HNA said it plans to use the funds to expand its operations by buying aircraft and support six other projects, such as pilot training, engine maintenance and training facilities.

The mainland’s fourth-largest airline, whose A shares have been suspended from trading since early January, announced over the weekend that the share placement will be subject to shareholder and regulatory approval. Its share trading remained suspended on Monday.

The unit, Temasek Fullerton Alpha, will buy 700 million yuan worth of the shares, or 10 per cent of the total.

In January, the Hainan province-based carrier said in a filing to the Shanghai Stock Exchange that important matters related to the company were being planned, adding that is was not clear whether those plans would amount to a major asset restructuring.

Hainan Airlines weighs asset restructuring as parent HNA charts new course

At that time, its embattled parent HNA said it would use more shares in the listed firm as collateral to meet its cash needs.

“The fresh funds are aimed at helping the airline enhance its competitiveness,” said He Yan, a fund manager with Shanghai Shiva Investment. “It will also help the company reduce debt.”

Hainan Airlines’ debt to asset ratio hit 62.52 per cent at the end of 2017, 8.34 percentage points higher than the previous year.

It was the worst performer among the mainland’s eight listed carriers in terms of return on equity in 2017.

HNA has been one of China’s most active global asset buyers in recent years, purchasing equities and assets in companies including hotel group Hilton Worldwide Holdings, airline catering giant Gategroup, aviation servicing company Swissport, and Deutsche Bank.

But it has been offloading assets to meet debt obligations, following what was a US$50 billion acquisition spree.

Some good news for embattled Chinese conglomerate HNA as airline unit sees profits rise

South China Morning Post reported in April that Temasek was interested in buying into HNA’s Hong Kong-based carriers including Hong Kong Airlines and Hong Kong Express Airways.

Hainan Airlines also said it would issue a combined 3.36 billion shares to HNA Group and a Tianjin-based investment fund in exchange for 10.48 billion yuan worth of assets including a 60 per cent stake in HNA Aviation and a controlling stake in low-cost airline, West Airlines.

After the transactions, the controlling shareholder, or the single largest share owner of Hainan Airlines, will become Hainan Province Cihang Foundation, which is connected to HNA Group, replacing Hainan’s state-owned assets supervision and administration commission.