HNA Grabs $3.2B Loan Lifeline From China CITIC Bank

HNA Group is said to have missed loan payments to China CITIC Bank in December, but that reported financial stumble didn’t stop the state-owned lender from handing its struggling client a new RMB 20 billion ($3.2 billion) credit facility last week.

The Chinese airline-to-property group said in a statement on Friday that it had signed an agreement with CITIC Bank in Beijing that same day that would provide HNA with the fresh cash, according to an announcement from the Hainan-based firm.

The financial infusion is timely for HNA, which reportedly missed a planned payment on a RMB 1.7 billion trust product issued by CITIC Trust last week. The company chaired by “Buddhist billionaire” Chen Feng is preparing to dispose of assets to help pay its bills, after spending some $40 billion on overseas acquisitions over the past two years.

HNA Slims Downs To Head Off Cash Crisis

CITIC’s credit facility is designed to help the parent company of China’s Hainan Airlines, to achieve “strategic transformation” and the “high-quality development” of the aviation industry in the company’s home province of Hainan, HNA Group said. The conglomerate’s management reportedly revealed to its major creditors in late January that it faced a cash shortfall of at least RMB 15 billion ($2.4 billion) in the first quarter.

Since last year, the outfit that was once among China’s most aggressive cross-border buyers has been selling off assets globally after it discovered that debt-fuelled acquisitions had left it paying more in interest than it took in as earnings. Chief executive Adam Tan said in December that the company was in talks to sell overseas properties as part of the strategic trimming.

Last month, HNA sold 1 York Street, an office tower in downtown Sydney it had bought in 2011, to Blackstone Real Estate Partners (BREP) Asia fund for about A$200 million ($161 million). The deal came a few weeks after the conglomerate was reported to be approaching investors to sell its office buildings in London’s Canary Wharf.

Late Payments Don’t Lessen Lender’s Love for HNA

CITIC Bank has long enjoyed a good relationship with HNA Group, said the bank’s president Sun Deshun in the statement. Sun said the bank is very confident in HNA’s future prospects, and believes the pair of companies can build a long-term strategic partnership.

The bank’s optimism comes two months after it revealed that HNA Aviation Group, a unit of the conglomerate, was having trouble repaying short-term debts. At the time, CITIC Bank said it was working with HNA to resolve the situation.

More Debt Headaches Loom After Buying Binge

Notwithstanding the financial relief offered by the banking behemoth, a potential debt crisis awaits HNA. Its maturing offshore and onshore notes will cost the group more than RMB 12 billion ($1.88 billion) in both the third and fourth quarters, according to Bloomberg. The bill this quarter is RMB 1 billion ($158 million).

HNA Group’s total outstanding debt jumped more than a third in the first 11 months of 2017 to RMB 637.5 billion ($101 billion), including bank loans and bonds, a filing shows. The highly leveraged group was reported earlier this month to have entered into talks with several developers, led by Sun Hung Kai Properties and other investors, to secure $1.5 billion to $2 billion in loans relating to the residential site HNA acquired in Hong Kong’s Kai Tak area.

China CITIC Bank is part of the state-owned investment company Citic Group based in Beijing. The bank came to the aid of Chinese developer Advanced Business Park in 2015 by taking a 40 percent stake in the company’s £1.7 billion ($2.4 billion) Royal Albert Docks regeneration project in east London.