Exclusive: China Development Bank supervising HNA asset
sales - sources
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[December 14, 2018]
By Kane Wu, Shu Zhang and Julie Zhu
HONG KONG/BEIJING (Reuters) - China
Development Bank (CDB) is leading a team to supervise HNA Group's asset
disposals as the heavily indebted conglomerate scales back operations to
a point that will leave it holding only core assets, people familiar
with the situation said.
The finance-to-aviation group is more than a year into the process of
unwinding a $50 billion acquisition spree that at its peak netted the
group stakes in banks, fund managers, hotels, property and airlines,
among other assets.
Faced with soaring debts and China's crackdown on aggressive dealmaking
firms, HNA has pushed ahead with asset sales that have so far included
real estate, stakes in hotels groups and discussions on key overseas
units such as Ingram Micro and its luxury $300-million-plus corporate
A work group, led by China's largest policy bank CDB as HNA's biggest
creditor, moved into HNA headquarters in Haikou in the southern province
of Hainan in the second half of the year and is closely monitoring its
asset sales, the people said.
The bank is not involved in individual sale negotiations but any deal
would need its nod, according to two of the people.
Last month, Hainan Airlines <600221.SS>, HNA's main domestic carrier,
said it was seeking a 7.5 billion yuan ($1.09 billion) loan from a group
led by CDB, to help cover operating expenses.
Earlier this month, financing from CDB was instrumental in Airbus <AIR.PA>
resuming stalled delivery of planes to HNA-affiliated airlines.
CDB is pushing HNA to get its house in order by the middle of next year,
said two of the people, who could not be named as the information is
"It looks like the regulators have gone beyond simply cutting back HNA's
assets and maybe moving toward complete dissolution of the company but
they have yet to declare that as the official policy," said Andrew
Collier, managing director of Orient Capital Research, which focuses on
An HNA spokesman said the group was refocusing its strategy around its
core aviation-related assets to improve operations and strengthen its
"The company has remained disciplined and thoughtful as it takes
decisive actions to streamline its portfolio and organizational
structure," he said.
CDB declined to comment.
BACK TO CORE
HNA is planning to shed assets and retain only Hainan Airlines and its
logistics business, three of the people said.
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A Chinese flag (C) flutters at the headquarters of China Development
Bank (CDB) in Beijing, China September 23, 2018. Picture taken
September 23, 2018. REUTERS/Florence Lo
It has been engaged with potential investors for its stakes in two Hong
Kong-based carriers, Hong Kong Airlines and Hong Kong Express Airways, two of
Singapore state investor Temasek Holdings had expressed interest in the airlines
but walked away in the end, according to one of them.
HNA is also in talks to bring in new investors as controlling shareholders in
its smaller regional airlines in China, the people said.
On Wednesday, HNA signed an agreement with state-owned Beijing Tourism Group to
transfer shares in Beijing Capital Airlines.
"Overseas airlines and domestic regional airlines are not part of the core
businesses and will likely go off its books," said a Hong Kong-based hedge fund
analyst, who has been following HNA's unwinding of assets.
Last month, Hainan Airlines agreed a restructuring of its Urumqi Air unit which
involved ceding majority control to the Urumqi government and leaving it with 30
Founded in 1989 as an airlines operator in China's Hainan island, HNA had been
aggressively buying overseas assets and expanding its businesses since 2015,
aiming to build a global empire with trophy holdings such as stakes in Deutsche
Bank <DBKGn.DE> and Hilton Hotels Worldwide Holdings <HLT.N>.
Less than three years later, HNA has found itself reversing track. It has sold
over $12 billion in overseas assets this year and has at least $23 billion more
to offload, according to Reuters calculations based on filings and media
The conglomerate has disposed nearly 300 billion yuan ($43.6 billion) worth of
assets in 2018, its chairman Chen Feng told local magazine Caijing in November.
(Reporting by Kane Wu and Julie Zhu in Hong Kong, Shu Zhang in Beijing,
additional reporting by Jamie Freed in Singapore; Editing by Jennifer Hughes and
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