HNA’s CWT International Defaults on HK$1.4B Loan

CWT International (CWTI), a unit of Chinese conglomerate HNA Group announced on Tuesday that it had defaulted on a HK$1.4 billion ($179 million) loan it received less than seven months ago — an event which its creditors say could lead to seizures of real estate and other assets.

In a filing to the Hong Kong Stock Exchange, CWTI said it has failed to pay accrued interest and fees associated with the loan totaling HK$63 million.

If the outstanding amounts are not repaid by 9am on Wednesday (today), the lenders had threatened to “enforce the security and obtain possession of all charged assets.”

The default, and the stance of HNA’s creditors, mean that the group, which is best known as the parent of China’s Hainan Airlines, could lose control of corporate and real estate assets worth approximately HK$24.6 billion which had been pledged as collateral on the loan.

London Office Building, US Golf Courses Could Be Seized

Among the assets belonging to CWTI which could be changing hands is 17 Columbus Courtyard an office building on London’s Canary Wharf which HNA has purchased in July 2016 for ₤140 million ($183 million) as part of its $35 billion global acquisition spree.

In February this year, HNA was said to be selling the building which provides London offices for Credit Suisse Group AG and other tenants, to Cindat Capital Management. While the exact transaction amount of the transaction was not revealed, Reuters reported that HNA put it on sale in 2018 with a value of $166 million.

In the US, CWTI had pledged a set of Seattle area golf courses against the loan, after having purchased those properties from local developer Oki Golf for $137 million in 2016.

CWTI grew out of a merger between Singapore logistics firm CWT, which HNA purchased for around $1 billion in early 2017, and one of the group’s existing Hong Kong-listed entities which it then renamed as CWTI.

HNA has been struggling since late 2017 to find a buyer for CWTI as its cash crunch worsened, and in July last year sold a set of five Singapore warehouses from the CWT portfolio to Mapletree Logistics Trust for S$730 million ($535 million). That sale, which came less than seven months after HNA closed on the CWT acquisition, represented a 3.3 percent discount to the properties’ earlier valuation.

Attempting to Refinance a One Year Loan

CTWI said late last month that it would be unable to make full repayment of the HK$1.4 billion as scheduled in October if it could not sell off further assets, which it said has been challenging, and that it may need to refinance the loan.

The company confirmed in this week’s statement that its total assets and net assets, which came to HK$24.6 billion and HK$5.3 billion respectively as of December 31, 2018, exceed the value of its outstanding loans and related amounts.

Its failure to make payment on its interest and fee obligations has also triggered a cross default under a HK$766 million term loan facility granted by a lender to an undisclosed wholly owned subsidiary of CWTI. The company says that it is actively negotiating with relevant lenders to come up with other repayment arrangements, according to the statement.

HNA Sell Off Still Not Fast Enough to Pay Down Debts

The default comes despite HNA having conducted a more than one year fire sale of assets in Greater China, and worldwide, in a race to meet its credit obligations.

Earlier this month the debt-ridden group was said to have sold a site with two historical homes in Hong Kong’s prestigious Victoria Peak area for HK$550 million ($70 million), suffering a more than 22 percent loss on the property just over one year after purchasing it.

In February, HNA Group sold off its last piece of land in Hong Kong’s Kai Tak area at a HK$740 million ($94 million) loss. In the same month, the company was said to be selling the Reuters building in London for £135 million ($176 million) or 60 percent less than it had paid to acquire the asset in 2015.

In March, funds managed by Blackstone agreed to purchase a controlling stake in Hong Kong International Construction Investment Management Group (HKICIM), the primary listed property subsidiary of HNA Group, for HK$7.02 billion ($894.8 million).