Caixin
Dec 31, 2019 07:24 PM
FINANCE

HNA Offloads Another Big Asset as Its Money Problems Persist

HNA shot to prominence between 2016 and 2017 after splurging more than $40 billion on acquisitions across six continents
HNA shot to prominence between 2016 and 2017 after splurging more than $40 billion on acquisitions across six continents

Cash-strapped HNA Group Co. Ltd. has decided to sell off another multi-billion-yuan asset as the conglomerate continues to grapple with a long-running liquidity crisis.

Shanghai-listed HNA Infrastructure Investment Group Co. Ltd., an HNA unit focused on infrastructure investment and operation, plans to sell its entire stake in Hainan Golden Bay Investment and Development Co. Ltd. for 10.1 billion yuan ($1.43 billion), the former announced Friday (link in Chinese) in a statement. The buyer is a state-run real estate developer in South China’s Hainan province, Hainan Development Holdings Real Estate Group Co. Ltd.

Golden Bay runs a land reclamation project in Hainan’s capital of Haikou. Construction was completed in 2018, but it has yet to begin operating. Golden Bay had invested 3.75 billion yuan of its own capital in the project, but the fact that it hasn’t made any money has left the company teetering on the verge of collapse.

According to the announcement late Friday, Golden Bay lost almost 20 million yuan in 2018 and around 28.5 million yuan in the first half of 2019. As of June 30, the company’s current assets excluding inventory were worth 1.48 billion yuan less than its current liabilities, according to an auditor’s report by the accounting firm Ernst & Young Hua Ming LLP. HNA Infrastructure has had to continuously provide funding to the money-losing company.

HNA Infrastructure said in its statement that it decided to unload the project in part because it was uncertain about when it would begin generating money.

The buyer, which is under the control of the Hainan State-owned Assets Supervision and Administration Commission, reported that it had around 1.9 billion yuan in total assets at the end of 2018.

The company will purchase the stake in Golden Bay in three phases using a combination of bank loans and its own capital. China Development Bank will provide the loans, according to the statement.

HNA Infrastructure manages a variety of projects including real estate, airports and hotels. The company has been under growing pressure in recent years to repay its mounting debts, which totaled around 56 billion yuan in the first half of 2019.

Its parent HNA is going through its own liquidity crisis. Once known for its ambitious debt-fueled overseas acquisitions, HNA has periodically made the news in recent years for missing payments, selling assets and struggling with debts that climbed to 706.7 billion yuan as of June 30, according to the company’s first half financial statement.

HNA shot to prominence between 2016 and 2017 after splurging more than $40 billion on acquisitions across six continents. The once little-known airline operator became the biggest shareholder of iconic companies such as Hilton Worldwide Holdings Inc. and Deutsche Bank AG as well as paying top dollar for high-end properties from Manhattan to Hong Kong.

The company and other equally acquisitive private firms have since come under pressure from Beijing to sell off assets due to concerns that their previous spending sprees could worsen the country’s debt problem and destabilize its financial system.

Contact reporter Isabelle Li (liyi@caixin.com)

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