China’s HNA Group receives bankruptcy filing from creditors

HNA Group, one of China’s largest conglomerates, has reportedly entered bankruptcy following claims from its creditors that the group has failed to pay off its debts.

In a statement last Friday (29 January), HNA said the Hainan Provincial Higher People’s Court has issued a notice stating that its creditors have filed for bankruptcy and reorganisation because the Group could not pay off its debts, as reported by Simple Flying.

“Our group will cooperate with the court to conduct judicial review in accordance with the law, actively promote debt disposal, and support the court to protect the legal rights and interests of creditors in accordance with the law to ensure the smooth progress of production and operation of the enterprise,” it stated.

HNA Group was established on the foundations of Hainan Airlines in 1993. It has since grown to a massive conglomerate featuring 14 airlines – including Hainan Airlines, Lucky Air and Grand China Air – and more than 900 aircraft.

CNN reported that HNA embarked on a $40 billion acquisition spree since 2015 that included investments in Hilton Hotels and Resorts, and Deutsche Bank. The Group assets topped 1.2 trillion yuan (S$186 billion) by the end of 2017.

HNA accumulated a lot of debts due to its acquisition spree which led to regulatory scrutiny. The Group then shifted focus to tourism and airlines as it also unwinds the bulk of the acquisitions.

In June 2018, Hainan Airlines decided to sell 20 per cent of its shares to no more than 10 investors, including Temasek Group’s subsidiary Temasek Fullerton Alpha, to raise 7 billion yuan (S$1.09 billion).

Temasek Fullerton Alpha has reportedly bought 700 million yuan (S$140 million) worth of HNA shares, or 10 per cent of the total of 7 billion yuan shares, as reported by SCMP.

In February last year, it was reported that the Government of Hainan – the southern province that HNA is headquartered in – was in talks with regards to the ownership of the company as it failed to meet financial obligations after taking a hit from the pandemic.

According to the plan, most of HNA’s airline assets will be sold to China’s three largest carriers which are China Eastern Airlines Corp, Air China Ltd and China Southern Airlines Co.

Meanwhile, it was recently reported that the Chinese Government has intended to dispose of HNA Group Co’s non-aviation assets through a trust.

This was revealed by people familiar with the matter, Bloomberg highlighted.

The sources, who refused to be identified because the plan is yet to be made public, said that HNA’s creditors will be allowed to swap their debt into equity in the new, pared-back company under this plan, or gain a stake in the trust managing the divestment of the other assets, depending on their lender status.

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