HNA’s debt shrinks for the first time as one of China’s biggest asset buyers reverses course
Though HNA Group managed to reduce one of China’s biggest debt piles by selling dozens of assets, the embattled Chinese conglomerate will probably need to get much slimmer before regaining the trust of investors.
Total debt fell 9.5 per cent to 541.6 billion yuan (US$79 billion) at the end of June, down about US$8.3 billion from a record set at the end of last year, according to figures derived from a half-year report dated Friday. It’s the first time the number has fallen, based on public data compiled by Bloomberg stretching back to 2005.
The lighter load may ease the pressure on HNA, which is seeking to recover from a binge that involved borrowing tens of billions of dollars to fund purchases ranging from big stakes in Deutsche Bank to skyscrapers in Manhattan. But debts remain high and the results weren’t enough to shake off concerns about the company.
“The improvement does not appear material enough and management perhaps needs to do more,” said Warut Promboon, managing partner at credit research firm Bondcritic. “Asset sales are a good step in the right direction.”
The company, along with the likes of Dalian Wanda Group and Anbang Insurance Group, is now reversing course after spearheading an unprecedented shopping spree of high-profile assets worldwide, which ultimately drew the ire of the Chinese government amid concerns about unsustainable debt levels.
HNA has sold more than US$17 billion in assets this year - much of it coming from the sale of its holdings in Hilton Worldwide Holdings and its spin-offs - according to a Bloomberg tally. More disposals are on the way after the company agreed to unload billions of dollars worth of shares in Avolon Holdings and the Radisson hotel chain. HNA is also seeking to sell buildings across America, London and China, people familiar with the matter have said.