HK Express deal exposes Chinese conglomerate HNA Group’s key assets as debt repayment pressure mounts
- The distressed former global assets acquirer faces debt repayment of US$2.8 billion this year and US$30.7 billion by 2025
- Uncleared debts and possible sale of blue chip assets make survival difficult for Chinese group
HNA Group has to be smart about its asset disposals as the sale of Hong Kong Express Airways is barely a drop in the bucket for the distressed Chinese conglomerate’s debt obligations and exposes its income-generating assets, say analysts.
HNA on Wednesday agreed to sell the low-cost carrier to Hong Kong-based Cathay Pacific Airways for HK$4.93 billion (US$628 million). According to a stock exchange filing on Wednesday, Cathay will pay HK$2.25 billion in cash and repay HK$2.68 billion of debt held by HK Express.
The proposed sale just about covers 22.5 per cent of repayments on bonds and term loans of 18.9 billion yuan (US$2.8 billion) due this year, which rises to 205.9 billion yuan by 2025, Bloomberg data shows.
David Yu, finance professor at New York University Shanghai, said that since HNA is in need of additional funds they have to sell smartly to get a good price especially when more of its loans are maturing and there is motivation to sell.
“It might be difficult to achieve a ‘good deal’ when there is this pressure from the debt repayments overhang,” he said.