HNA Chairman Barred From Golfing and Taking Flights

The chairman of China’s embattled HNA Group Co. Ltd. was restricted from excessive spending on travel, golf and other activities by a court as debt woes continue rattling the once high-flying conglomerate.

A district court in Xi’an, northwest China’s Shaanxi province, issued orders to limit spending by HNA and its 67-year-old co-founder and Chairman Chen Feng, a court document database showed Wednesday.

As the legal representative of HNA, Chen will be restricted from taking flights, buying train tickets that are pricier than economy class, accommodations in luxury hotels, spending on entertainment such as golf and leisure trips, buying property and nonessential vehicles, and investing in high-yield wealth management products, according to the orders.

The Xi’an court said it issued the orders in a debt dispute filed against HNA in August. Hainan-based HNA, an aviation-to-finance giant, shepherded Chinese companies’ overseas asset buying spree a few years ago but has been struggling with mounting unpaid debts amid a government crackdown on excessive corporate leverage.

HNA has been mired in a debt crisis since late 2017 as tightening regulatory scrutiny of debt-driven investments put a brake on many companies’ borrowing. The cash crunch further deteriorated as the Covid-19 pandemic froze the tourism and aviation market, the core business of HNA. The company failed to repay several debts on time, leading to multiple lawsuits.

HNA didn’t reply to Caixin questions on the Xi’an court order. A person from the company said Chen stepped away from HNA’s daily operations but remains as chairman. Spending restrictions on Chen won’t affect HNA’s business operations, the person said.

Since 2018, HNA has offloaded assets worth nearly 100 billion yuan ($14.7 billion) and engaged in a business restructuring to defuse debt risks.

As of the end of June 2019, HNA had 707.7 billion yuan of unpaid debts, according to the most recent data available from the company. HNA had as much as 1.2 trillion yuan of assets in 2017 at the height of its buying binge. But the total has declined steadily as the company sells off assets, some of which have lost value since their purchase. Net assets dipped below 1 trillion yuan to about 980 billion yuan in the middle of last year, according to the 2019 mid-year report.

In April, HNA missed payments on 1.15 billion yuan of bonds. Shortly before the default, the company was blacklisted by courts in Hainan, Beijing and Xi’an for failing to comply with court decisions on debt disputes.

HNA’s core business unit Hainan Airlines Holding Co. Ltd. had 26.8 billion yuan of outstanding liabilities as of June 30, the company’s interim report showed. The company said it reached agreements with creditors to delay repayments for 2.9 billion yuan of debts while discussing solutions for the rest.

At a Monday meeting with investors, Hainan Airlines pledged to accelerate restructuring and disposal of noncore assets to recoup capital. It is also seeking support from the government and potential strategic investors to improve its access to new credit, the company said.

In February, the government of Hainan province in southern China, where HNA is headquartered, set up a working group to organize a rescue.

Caixin learned that the Hainan government tried to pursue several financial institutions to provide new credit to HNA but none of the lenders showed interest. A person close to the restructuring said the working group has developed a plan to deal with HNA’s risks and is waiting for approval from higher authorities.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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