A Chinese court has approved the $170bn restructuring of HNA Group, a victory for the conglomerate’s state controllers that could prove instructive for how Beijing deals with indebted property group Evergrande.
Formerly China’s most aggressive offshore dealmaker, HNA said on Sunday that a court in Hainan, the southern island where it is based, had backed a plan to revamp more than 300 group companies into four new entities.
The approval came after tens of thousands of HNA’s Chinese creditors voted on the plan on October 20, with about 90 per cent backing the proposal.
Ahead of the vote, a number of frustrated creditors had called for the Central Commission for Discipline Inspection, the Communist party’s internal oversight group, to investigate the process amid allegations of misconduct by the administrators. Some were stunned to see the overwhelming support in the official voting results.
“I really don’t know where the 90 per cent affirmative votes came from . . . less than one-tenth of the money will be returned, for the rest we really don’t know detail of the plan,” one creditor told the Financial Times, adding that there appeared to be no options. “Whatever they want, we have no choice.”
Gu Gang, head of the HNA joint working group that is leading the restructuring, said in September the group had received a total of Rmb2tn ($313bn) in creditor claims and Rmb1.1tn ($170bn) had been confirmed.
The overhaul will hand control of HNA’s aviation, airport, financial and commercial divisions into separate units with new state and private shareholders.
The restructuring has been closely watched by investors against a backdrop of the problems embroiling Evergrande, a company saddled with liabilities of $300bn and whose travails have rattled markets.
Evergrande has been widely expected to require state intervention. No formal announcement has been made and the exact role of the government in such a process remains unclear.
Evergrande missed several interest payments on its offshore bonds in late September but transferred the funds just before 30-day grace periods expired, narrowly avoiding default.
David Yu, a finance industry expert at NYU Shanghai, said Beijing viewed the process of splitting up HNA into “bite-sized chunks” as successful and would probably take a similar approach on a regional basis if a rescue of Evergrande was needed.
But Yu added that it was becoming clear that many smaller HNA creditors — including current and former staff who had wealth management products sold by the company — would never “be made whole”.
Progress in the HNA restructuring is the latest step in a years-long unravelling of the once powerful and politically connected Chinese conglomerate.
The group spearheaded an unparalleled spree of outbound Chinese investment in the mid-2010s. Acquisitions ranged from the core airline business and marquee properties such as New York’s 245 Park Avenue to investment in Deutsche Bank, in which HNA was the biggest shareholder, as well as in US electronics group Ingram Micro and the Hilton hotel group.
But financial regulators stepped up scrutiny of HNA over its leveraged acquisitions and opaque ownership. In late January, Chinese creditors launched official bankruptcy proceedings. Days later HNA subsidiaries said billions of dollars in funds had been misused.
Adam Tan, chief executive, and chair Chen Feng were taken into custody in September for unspecified crimes. No further details have been released about the pair.
Wang Jian, their co-founder, fell to his death in France in 2018.
Additional reporting by Emma Zhou in Beijing
HNA’s $170bn restructuring plan approved as focus turns to Evergrande
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