HNA Group

HNA unit pledges 75pc of shares with China Construction Bank as parent looks to pare billions in debt

Six other units of the debt-ridden HNA Group have already lost US$10 billion in market value in the past month

PUBLISHED : Wednesday, 22 August, 2018, 12:36pm
UPDATED : Thursday, 01 November, 2018, 4:17pm

HNA Technology Investments, a unit of HNA Group, said on Wednesday its controlling shareholder has pledged 75 per cent of the company’s shares with China Construction Bank against loans, heightening the risk of share price fall.

Companies that have pledged a large amount of shares tend to witness higher volatility in their shares as it’s difficult for them to increase their pledges when prices fall. It may cause lenders to sell these shares on the market to maintain the margin, which can lead to further price falls.

Six other units of the debt-ridden conglomerate have already lost more than US$10 billion in market value in the past month.

Controlling shareholder HNA EcoTech Pioneer Acquisition has agreed to pledge 238.89 million ordinary shares of Hong Kong-listed HNA Tech to secure a loan from China Construction Bank (Asia), the Hong Kong banking unit of CCB, China’s second largest lender by assets, according to an exchange filing.

These pledged shares account for 74.75 per cent of the total issued shares of HNA Tech.

HNA Group, which was one of China’s most acquisitive companies overseas, is now struggling to use various financing means to repay more than US$85 billion of debt incurred from its multi-year buying spree, according to Bloomberg data.

It has pledged large amounts of equity for loans. Bohai Capital, a Shenzhen-listed financing arm of HNA Group, said earlier this month its controlling shareholder HNA Capital had pledged 2.1 billion shares against loans, which represented 99 per cent of the shares held by HNA Capital.

But shares have been volatile.

Six of the group’s mainland-listed units, including Bohai Capital, have plunged since their respective trading resumption in the past month, wiping out 69 billion yuan (US$10.1 billion) in market value, based on share prices by Wednesday close.

They include HNA-Caissa Travel Group, Hainan HNA Infrastructure Investment Group, Hainan Airlines Holding’s A shares, CCOOP Group, and HNA Investment Group.

Among them, HNA Infrastructure Investment has lost 45 per cent since August 13, when it resumed trading following a six-month halt, erasing a total of 19.5 billion yuan in market value. Hainan Airlines Holding’s A shares have also shed 34 per cent since it restarted trading on July 19, with 18.8 billion yuan of value evaporating.

The only mainland-listed unit that remains suspended is HNA Technology, formerly known as Tianjin Tianhai Investment and Tianjin Marine Shipping, as the resumption is pending progress of its restructuring plan.

HNA has also been offloading assets worldwide to pay down its debt, including selling stakes in Hilton Worldwide Holdings and Deutsche Bank this year.

In one of its latest moves, the group is disposing a stake in Spain’s NH Hotel Group to Thailand’s Minor International for more than 600 million (US$694.4 million).