Shares of HNA affiliates rally after report of China bailout plan
20/02/2020 05:01
* Key HNA-related shares up by 10% daily limit in China
* Hainan govt plans HNA takeover, airline asset
sale-Bloomberg
* Air China, China Eastern prepared to discuss plan -source
By Zoey Zhang and Brenda Goh
BEIJING/SHANGHAI, Feb 20 (Reuters) - Shares in affiliates of
HNA Group surged on Thursday following a news report that China
plans to take over the debt-laden conglomerate as the
coronavirus outbreak has further hit its ability to meet
financial obligations.
The government of the southern province of Hainan, where HNA
HNAIRC.UL is based, is in talks to take control of the group
and sell off its airline assets, Bloomberg said on Wednesday,
citing people familiar with the matter.
HNA, which controls or holds stakes in a number of domestic
carriers including its flagship Hainan Airlines 600221.SS , did
not immediately respond to requests for comment on the report.
China's aviation regulator said last week it would support
restructuring or mergers to help airlines cope with the fallout
of the epidemic, which has prompted carriers to cancel thousands
of flights. urn:newsml:reuters.com:*:nL4N2AC10Q
The Bloomberg report said that under the plan most of HNA's
airline assets would be sold to China's three top carriers - Air
China Ltd 601111.SS 0753.HK , China Southern Airlines Co
600029.SS 1055.HK and China Eastern Airlines Corp
600115.SS 0670.HK .
Air China and China Eastern are prepared to hold talks, but
a deal could take time as the industry also battles the fallout
from the virus outbreak, a source with direct knowledge of the
matter told Reuters.
Air China and China Eastern did not immediately respond to
requests for comment. China Southern declined to comment.
Shares in Hainan Airlines, HNA Innovation 600555.SS and
HNA Investment Group 000616.SZ rose by their 10% daily limit
after the news report of the planned takeover.
HNA Technology 600751.SS , Bohai Leasing 000415.SZ and
HNA Infrastructure Investment Group 600515.SS gained 4% to
9.6%. Hong Kong-listed stocks linked to HNA also
rose. urn:newsml:reuters.com:*:nL4N2AK0PK
Heavily indebted HNA Group has restructured jet orders with
Europe's Airbus AIR.PA in a deal that includes an order for
dozens of A330neo jets, two people familiar with the matter told
Reuters. urn:newsml:reuters.com:*:nL8N2AJ6MG
TOUGH OUTLOOK
HNA Group was once one of China's most aggressive dealmaking
firms, spending $50 billion on acquisitions that included stakes
in Deutsche Bank DBKGn.DE and Hilton Worldwide HLT.N , and
prime property in New York, Sydney and San Francisco.
Its total borrowings were 706.7 billion yuan ($100.6
billion) as of the end of June, data filed to the government
shows.
It began unwinding many acquisitions to focus on its core
airlines and tourism businesses after racking up high levels of
debt and drawing regulatory scrutiny.
But the prices HNA has sought and the complex structures,
loans and other business bonds among its holdings have made it
tough to unwind them, bankers said.
In December, Chairman Chen Feng said the firm had delayed
some salary payments in 2019 because of cash flow shortages, but
vowed to resolve liquidity risks in 2020. urn:newsml:reuters.com:*:nL4N29515F
However, the virus outbreak has pressured the industry this
year, prompting flight cancellations and adding to an already
weak outlook for demand in a slowing global economy.
Airlines have tried to cut losses by putting foreign pilots
on unpaid leave. Hong Kong Airlines, also part-owned by HNA, has
said it will cut 400 jobs. urn:newsml:reuters.com:*:nL4N2A60YP urn:newsml:reuters.com:*:nL4N2A7248
(Reporting by Bhargav Acharya in Bengaluru, Zoey Zhang in
Beijing and Brenda Goh in Shanghai; Editing by Miyoung Kim and
Himani Sarkar)
((Bhargav.Acharya@thomsonreuters.com; Outside U.S.
+918061822589; Reuters Messaging:
Bhargav.Acharya.thomsonreuters.com@reuters.net))