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ExclusiveWill the global coronavirus outbreak impede or help HNA Group’s debt workout programme to slim down?
- HNA Group is now fraying as the current coronavirus outbreak exacerbates its financial distress
- Hong Kong Airlines, which HNA Group bought in 2006, is in talks for a financial white knight
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For four months starting in November 2016, a little-known Chinese company made waves in Hong Kong’s tight-knit real estate market, upending the intricate competition for influence between a handful of the city’s wealthiest and most prominent landowning families.
HNA Group, best known then as the owner of China’s fourth-largest carrier and an also-ran Hong Kong airline, was overpaying for land. Over four months, the Haikou, Hainan-based company paid HK$27.2 billion (US$3.5 billion) for four plots at the old Kai Tak airport, breaking records along the way, to build waterfront luxury flats.
Driven by co-founder Chen Feng, HNA Group was aiming to buy its way into the ranks of the world’s 50 largest asset-owning companies by 2030, using loans from China Development Bank and other lenders to triple its assets to 1.23 trillion yuan (US$177 billion) within two years.
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From its core airlines, HNA Group spent US$32 billion since 2015 on Manhattan office towers, stakes in Deutsche Bank and Hilton hotels, even down to a little jewellery producer in Hung Hom called Hifood Group.
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It did not take long for China’s financial regulators to notice HNA Group’s loans, which ballooned to US$108 billion by 2018. Concerned about systemic risk to the banking system, they ordered state-owned banks to cut their credit line and force the asset buyer to reverse course.
As the global coronavirus outbreak keeps tourists, business travellers and aircraft fleets on the ground, it is sapping HNA Group of much-needed cash flow and weighing on a plan to unwind its debt.
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