HNA Close to Sales of NYC, European Assets After Interest Payments Hit $5.1B in 2017

HNA Group has the highest interest expenses among Asian companies in the financial year of 2017, even topping Japanese conglomerate Softbank Group, according to a Bloomberg report. To address a debt crisis triggered by its recent two-year acquisition binge the Hainan-based company is reportedly close to selling a Manhattan office tower as well as a European transportation company in the hope of bringing in a combined $3 billion in cash to help pay down liabilities.

HNA Group recorded borrowing costs of RMB 32.1 billion ($5.1 billion) in 2017, up by 59 percent from the previous year’s RMB 20.2 billion, an annual report seen by Bloomberg shows. The once-acquisitive conglomerate’s rising interest obligations come after HNA ramped up its debts to RMB 598.2 billion in 2017, a 21 percent increase over the previous year.

HNA Hopes for Sale of New York Office Tower

While HNA has raised over $13 billion from asset sales over the past four months, the mainland group may soon be adding to that total through disposals in the US and Europe, as it struggles to cope with growing financial pressure.

After several months of searching for a buyer for 245 Park Avenue, which it purchased less than one year ago for $2.21 billion, HNA is reportedly in talks with New York’s SL Green Realty to sell the Manhattan office building, according to a Bloomberg report citing people familiar with the matter.

HNA purchased the ageing 1.7 million square foot (158,000 square metre) office tower from a joint venture between Brookfield Property Partners LP and the New York State Teachers’ Retirement System in May of 2017 in one of New York’s most expensive real estate deals ever.

Both HNA and SL Green declined to comment on the reported negotiations, and the Chinese group is also said to be looking into refinancing the asset as an alternative to disposing of the property.

Selling Off European Logistics Assets

On the other side of the Atlantic, the airline turned conglomerate is also closing in on a deal to offload a European logistics company for a $1.21 billion.

HNA Group is said to be in exclusive talks to sell Amsterdam-based TIP Trailer Services to infrastructure investor I Squared Capital for over €1 billion ($1.21 billion), according to a Wall Street Journal account citing people close to the deal.

HNA teamed up with Hong Kong-based private-equity firm Bravia Capital to acquire TIP Trailer Services in 2013 from GE Capital for an undisclosed sum.

Last month, HNA Group scrapped its planned listing of Zurich-based airline caterer Gategroup for fears that the caterer might not reach the value HNA wanted.

Fire Sale Could Reach $16 Billion Since January

Should HNA Group close on this latest pair of deals, the airline company will have taken in a total of over $16 billion cash from disposals of its assets since the beginning of the year.

Just two weeks ago, HNA offloaded 2 percent stake in Deutsche Bank which is valued at over $570 million and after the stock had lost around one-fourth of its value in the past year. The disposal came despite earlier assertions that the Hainan-based company had no plans to offload more shares in the German lender.

HNA Group also raised almost $9 billion cash by disposing of stakes in Hilton Worldwide and two of its spinoffs in the past month. The stake sale followed HNA’s sale of a pair of logistics projects in Hainan to mainland developer Sunac for RMB 1.9 billion ($300 million) last month.

The hotel share sales come after the Hainan conglomerate sold a trio of residential land plots in Hong Kong’s former airport site in Kai Tak to Wheelock and Company for HK$6.36 billion ($811 million), and Henderson Land Development for HK$16 billion ($2 billion) in March and February respectively.

The cash-starved company is also said to be marketing nine mainland properties including office buildings and hotels in Beijing and Shanghai for $2.2 billion. The properties include the 60-storey Shanghai HNA Tower on Lujiazui’s Puming Road, the Renaissance Shanghai Pudong Hotel.