Hainan Airlines plunges in China as trading reopens after 6-month suspension

Shares in Hainan Airlines Holding, the listed flagship enterprise of embattled Chinese conglomerate HNA Group, skidded by its daily limit on Friday as trading resumed following a six-month suspension, after the company announced details of a previous plan to issue 10.5 billion yuan (US$1.6 billion) of consideration shares and also to raise 7.04 billion yuan in cash through a private placement targeting Temasek and other investors that will fund the carrier’s acquisition of several domestic firms.

Hainan Airlines immediately fell 10 per cent at the market open to 2.91 yuan on the Shanghai Stock Exchange. The firm’s market value also quickly shrank 5.4 billion yuan to 49 billion yuan.

It is the third unit of the HNA Group to resume trading after a six-month halt. Earlier this week, HNA-Caissa Travel Group and Bohai Capital Holding also plummeted quickly when trading reopened, erasing a combined US$1.6 billion in market capitalisation.

Two HNA units crash as trading resumes after six-month halt, wiping out US$1.6 billion in value

Friday’s stock plunge came after HNA Holdings announced it would issue about 3.36 billion consideration shares at 3.12 yuan each to acquire stakes in several firms. The consideration shares are worth 10.5 billion yuan.

To support the acquisition, it would also raise 7.04 billion yuan in cash from a private placement of A shares in the over the counter market to no more than 10 investors, including Temasek Fullerton Alpha, an asset management arm of Singapore’s state investment firm Temasek.

After the deal is completed, the de facto controller of Hainan Airlines will be changed to Hainan Province Cihang Foundation from Hainan’s State-owned Assets Supervision and Administration Commission, the provincial regulator of state-owned enterprises, according to the announcements.

The consideration shares will be used to acquire 60.78 per cent stake in aircraft maintenance service firm HNA Technic, 59.93 per cent stake in HNA Aviation Technics Holding, and a 100 per cent stake in flight training service firm Sky Plumage from its parent HNA Group.

It also plans to buy 60 per cent of Chongqing Western Airlines Holdings from HNA Group and 29.72 per cent stake in China West Airlines from Tianjin Chuangxin Investment.

The supporting fund will be spent in buying four aeroplanes for China West Airlines and on several projects involving aircraft maintenance, flight training, and airport construction.

A total of seven listed units of HNA Group in mainland China have suspended trading since earlier this year amid investor concerns about the financial distress the group is facing.

The four companies which remained suspended are Hainan HNA Infrastructure Investment Group, Tianjin Marine Shipping, CCOOP Group, and HNA Investment Group.

Earlier this month, the group’s US dollar-denominated corporate bonds, maturing this year, fell by the most in six months after former co-chairman Wang Jian fell to his death in an accident in France.

HNA Group appoints Chen Feng as chairman, elevating the co-founder to top role following tragic death of Wang Jian

Wang’s death has cast doubt over HNA’s future, as the group struggles to offload assets worldwide to repay its debt, while questions still abound over the ultimate owner of the group.

In July last year, HNA said in a statement that two entities – Hainan Cihang Charity Foundation, an organisation set up in New York by the group, and Hainan Province Cihang Foundation – owned a combined 52.25 per cent stake of the group. Wang and Chen Feng, HNA’s current chairman owned 15 per cent interest each.

The statement said all individual shareholders including Wang and Chen “have pledged to donate all of their shares to the two charitable organisations upon resignation or death”.

Nonetheless, the group has revealed little details about the two entities.

Last week, HNA CEO Adam Tan announced at an internal memorial service that Wang’s 15 per cent equity stake has been donated to Hainan Province Cihang Foundation, “according to his wishes when he was alive”, the magazine Caixin quoted sources as saying.