HNA Selling $1.4B Stake in Hilton Spin-Off, Cutting 25% of Workforce

HNA Group plans to sell its $1.4 billion stake in US hotel chain Park Hotels & Resorts Inc to ease its financial crisis, according to public documents regarding the cash-strapped Chinese conglomerate. The Hainan-based airline company will sell “some or all” of its stake in the NYSE-listed hotel REIT, according to a filing to the US Securities and Exchange Commission by the Hilton spin-off.

The potential stake sale is the latest sign of financial distress for the troubled Chinese group, which made headlines in recent years for becoming the biggest shareholder in Germany’s Deutsche Bank and snatching up investments in real estate, technology and logistics firms globally. The news of this latest disposal comes despite HNA having secured more than $8 billion in cash in recent weeks through fresh credit and sales of properties in New York and Hong Kong.

This week’s attempts by HNA management to keep the conglomerate upright also include reports that the company is planning to lay off 100,000 people, or about 25 percent of its global workforce. The budget purge program comes as HNA attempts to climb out of a $100 billion debt hole which it dug through a more than $40 billion acquisition binge over the past two years.

HNA Unwinds Hilton Holdings in Quest for Cash

HNA’s proposed transaction would see the group disposing of its shares in a portfolio of 50 airport hotels, resorts and urban hostelries spread across the US, as well as in Europe and Latin America. The share sale would be done through public stock offerings, with no set schedule having been announced, according to Park Hotels and Resorts’ filing.

HNA Group’s ownership of Park Hotels & Resorts has its origin in the group’s $6.5 billion 2016 acquisition of a 25 percent stake in Hilton Worldwide Holdings from Blackstone. In early 2017, Hilton Worldwide was split into three publicly listed companies including Park Hotels & Resorts Inc and Hilton Grand Vacations. The reorganisation of Hilton’s holdings left HNA with 25 percent stakes in Hilton Worldwide and its two spinoffs respectively.

After the proposed sale, HNA would retain stakes in Hilton Worldwide and Hilton Grand Vacations worth approximately $7.4 billion. The company has not released plans to sell its holdings in either of the remaining Hilton affiliates.

Cutting Down on Printing to Keep HNA Afloat

The stake sale announcement comes less than two days after a report emerged of HNA launching one of the biggest workforce reduction plans of any single company ever.

The report by financial information provider Risk Event-Driven and Distressed Intelligence (REDD) cited multiple sources with HNA confirming a 100,000 person layoff plan. The reduction in force would cut staffing levels in the conglomerate’s human resources, business operations and asset restructuring teams, and includes business units that the group is planning to sell. HNA is said to have informed staff at its Hainan headquarters about the layoff plan.

For those employees who are fortunate enough to keep their jobs, life is becoming more austere. The company issued a notice to its team members in January urging them to limit spending on events, avoid business trips and control gifts for public affairs. HNA also prescribed strict control of even minor resources, such as keeping monthly stationery expenses at RMB 20 ($3) per person and cutting back on printing.

Raising Cash With Property Sales

The erstwhile asset binger has been selling real estate projects in the past months to raise cash. Last month, HNA sold a pair of land parcels at Hong Kong’s former airport site in Kai Tak to Henderson Land for HK$16 billion ($2 billion). Prior to that, the group 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 transaction came a few weeks after the company was reported to be approaching investors to sell two office buildings that it had purchased on London’s Canary Wharf for around 366 million pounds ($496 million). Meanwhile, in the US, HNA was reported last month to be marketing commercial properties in New York, Chicago, San Francisco and Minneapolis valued at a combined $4 billion.