Caixin
Aug 03, 2018 08:22 PM
BUSINESS & TECH

Embattled HNA Group Clips Own Wings

An HNA Group office building in Beijing. Photo: VCG
An HNA Group office building in Beijing. Photo: VCG

*HNA has said it is scaling back on its financial sector presence to focus on its core aviation, tourism and logistics businesses

*At least three HNA units have made moves to leave the financial industry, including a credit score firm and a life insurance company

(Beijing) — HNA Group says it is reverting to its original flight path.  

A recent spate of asset sales shows how the embattled airline-turned-globe-spanning-conglomerate has refocused its strategy to concentrate on its core aviation-related businesses, which has coincided with a management shakeup.

HNA Group Co. Ltd. has been unloading assets at an accelerating pace since the second half of 2017, when it hit the brakes on an overseas shopping spree after regulators grew concerned that all of the wheeling and dealing had put the company in too much debt. The turbocharged expansion had been overseen by co-founder Wang Jian, who died in an accident in France last month.

Once among China’s most aggressive dealmakers, HNA has been in a liquidity squeeze since last year amid regulators’ clampdown on Chinese companies’ debt-driven investments.

To improve its financial situation, HNA aims to continue to scale back its presence in the financial sector so it can refocus on its core aviation, tourism and logistics businesses, according to a statement that the company released on Wednesday.

Since late July, at least three HNA units have made moves to leave the financial services industry. On Wednesday, the Shanghai branch of the People’s Bank of China announced that it will remove Bohai Credit Information Co. Ltd. from a list of regulator-approved credit score firms because the HNA unit had “applied to retreat from the credit scoring business.”

A day earlier, Shin Kong & HNA Life Insurance Co. Ltd. a joint venture of HNA Group and Taiwan's Shin Kong Life Insurance Co. Ltd., announced that HNA was selling off its 50% stake in the subsidiary. It did not disclose the financial terms of the deal.

On Monday, another HNA unit, Shenzhen Qianhai Air & Shipping Exchange Co. Ltd., announced it was exiting its retail financial products business to comply with a government order and conform to its parent’s new strategy. The subsidiary had helped airlines and shipping projects obtain financing by finding investors for their wealth management products.

The renewed focus on aviation coincides with a slew of management changes at HNA Group, with some of company’s top investment executives leaving to make way for relatives of Chairman Chen Feng, who co-founded the conglomerate with Wang. Among them, Yang Guang has stepped down as president of HNA Group North America and as trustee of Hainan Cihang Charity Foundation, according to the conglomerate’s Wednesday statement.

The foundation owns a 52.25% stake in HNA Group, according to a previous statement by the conglomerate.

HNA Group Chief Investment Officer Wang Shuang has been replaced by Chen Chao, a nephew of Chen Feng. The statement did not say what happened to Wang Shuang. At the same time, Chen Feng’s son, Chen Xiaofeng, was elected vice chairman of the board of directors of Swissport Group, the world’s largest ground and cargo handling company, which is wholly controlled by HNA Group.

With the ongoing sales of its financial assets, HNA Group has culled its pillar businesses from seven to four. Since March, for example, its industrial-investment and new-media businesses have either been merged or abandoned.

Among its biggest deals, HNA Group sold part of its stake in Deutsche Bank AG. Last year, HNA Group purchased 10% of the bank for 3.4 billion euros ($3.9 billion), but as of April 23, it had pared its holding to 7.9%, according to a filing to local regulators. Based on the purchase price, HNA Group cashed out more than 400 million euros in the deal.

During the first six months of 2018, the company sold more than 60 billion yuan ($8.8 billion) in assets, accounting for more than 10% of the company’s net assets on the books, according to HNA’s statement on Wednesday. Caixin’s calculations put this year’s asset sales announced by HNA at more than 120 billion yuan.

And this might just be the beginning. Before Wang Jian died, he told Caixin that HNA Group expected to offload about 300 billion yuan in assets this year.

Contact reporter Leng Cheng (chengleng@caixin.com)

Read more about HNA Group’s hard landing.

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