HNA Group’s West Air unit gets breathing space to complete stake sale as creditors defer put option on bonds amid travelling slump

Creditors deferred their request for West Air to buy back about 292 million yuan of notes

The postponement is a crucial first step in buying time for HNA Group’s transfer of its stake in West Air to a unit of the Chongqing municipal government, according to a financial source

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An airplane carrying medics supporting the coronavirus-hit Hubei province receives a water cannon salute as it lands at Chongqing Jiangbei International Airport on March 18, 2020. Photo: Xinhua

Published: 4:00pm, 9 Apr 2020Updated: 10:56pm, 9 Apr 2020

West Air, a Chinese budget carrier owned by the HNA Group, has persuaded some creditors to postpone receiving their bond payments, getting much-needed breathing space as its indebted parent company struggles for financial survival amid a national lockdown that has grounded all but a handful of weekly flights.

The carrier, operating 35 aircraft from its base in Chongqing in central China, persuaded bondholders to withdraw 292 million yuan (US$41.3 million) of put options, according to West Air’s statement to the Shenzhen Stock Exchange, where the bonds are traded. The 13-year old carrier eventually paid 235.9 million yuan of bonds on April 7, according to the statement.

The deferment is a relief for West Air’s parent HNA, one of China’s biggest global asset acquirers to emerge in the past two decades. China’s largest private-sector aviation conglomerate, HNA is under de facto state ward by the local authorities of Hainan province to trim its debt burden, as the government tries to prevent its financial collapse from hurting the broader banking system while the nation’s economic growth slows to its slowest pace in four decades.

HNA agreed in December to sell its stake in West Air for an undisclosed price to Chongqing Yufu Assets Management Group, a state-owned company based in the megacity and a minority partner in the budget carrier, giving Yufu at least 70 per cent of the airline. The deal, when completed, would give the municipal authority of Chongqing, with a population of 31 million, its first hometown carrier.

A buyout behemoth’s billions in pledged shares. SCMP Graphics

HNA’s sale to Yufu is a crucial step for the Chongqing municipality to help repay West Air’s debt, said a financial source familiar with the plan, declining to be named. West Air did not respond to requests for comment by South China Morning Post.

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