Oct 18, 2019 03:08 AM

HNA Stymied in Attempt to Sell Stake in $8.5 Billion Plane Lessor

Hainan-based HNA continues to pursue asset sales after years of expansion sparked debt concerns. Photo: Bloomberg
Hainan-based HNA continues to pursue asset sales after years of expansion sparked debt concerns. Photo: Bloomberg

(Bloomberg) — HNA Group Co. has been stymied in an attempt to sell its stake in plane lessor Avolon Holdings Ltd., people with knowledge of the matter said. Such a divestment would be one of the indebted Chinese conglomerate’s biggest as it unwinds a global buying spree.

HNA reached out to Orix Corp. in the past few months to gauge the Japanese financial group’s interest in buying its remaining 70% stake in Avolon, according to the people. Orix, which already holds 30% of Dublin-based Avolon, decided it wasn’t interested in pursuing a deal, the people said, asking not to be identified because the information is private.

The Chinese group has been seeking a valuation of about $8.5 billion for Avolon, representing about 1.1 times book value, the people said. Orix paid $2.2 billion last year for its stake.

Selling out of Avolon would have been HNA’s biggest disposal since it unloaded a $6 billion stake in Hilton Worldwide Holdings Inc. in 2018. The attempt highlights how HNA’s liquidity challenges persist more than a year after soaring debts forced the company to begin dumping tens of billions of dollars in assets.

Pursuing such a large acquisition could have put pressure on Orix’s credit rating. While HNA isn’t currently in any active sale talks, it could still decide to approach other buyers for the business or make another attempt to engage with Orix, the people said.

A representative of HNA declined to comment. Orix didn’t discuss raising its stake in Avolon, nor is it considering doing so, said Yuka Kanaoka, a Tokyo-based spokeswoman for Orix.

“We are very happy with the current 30% investment,” she said.

Hainan-based HNA, once the biggest shareholder of the likes of Deutsche Bank AG and Hilton, continues pursuing asset sales. The group is said to be in talks to sell a $4 billion stake in technology firm Ingram Micro Inc. HNA is also considering reviving the sale of its container leasing business Seaco, people familiar with the matter said last month.

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