Caixin
Jan 23, 2021 06:24 PM

HNA Risk Disposal Plan Moving Into Key Stage, Indebted Giant Says

The plan to deal with the financial risks facing HNA Group Co. Ltd. is about to enter the key stage, the conglomerate said, after it turned to the government last year for help tackling the debt it racked up during a worldwide spending spree.

“The working group has completed the due diligence work,” HNA said in a statement (link in Chinese) posted on Friday, adding that the group has signed off on a risk disposal plan that adheres to the principle of being “law- and market-oriented.”

HNA, a former high-flyer that attracted global attention for its aggressive spending including a stake in hotel giant Hilton Worldwide Holdings Inc., was deeply mired in debt after liquidity issues emerged in 2017. The latest financial report it published, covering the first half of 2019, showed that the company had 706.7 billion yuan ($109 billion) of debt, bringing its debt-to-asset ratio to 72.07%.

But that could be just the tip of the iceberg. Several people told Caixin that the financing tools such as trust lending and short-term notes it used to fuel its rapid expansion make it hard to gauge HNA’s actual financial situation, and the company’s asset volume could also be inflated by those financing tools.

As it came under increasing pressure, HNA turned to local government for help. In March 2020, the government of South China’s Hainan province, where the company is headquartered, set up a working group to help resolve the company’s risks and ease its liquidity issues.

The Friday statement didn’t specify any details of the risk disposal plan, but the group’s leader Gu Gang told Caixin that it will serve as a “benchmark” for dealing with cases like HNA.

The statement about the plan also revealed that Gu has resigned as HNA executive director, a role he took on in February last year. Gu also serves as chairman of the state-owned Hainan Development Holdings Co. Ltd., a coordinator for large projects in the province.

Also leaving HNA is CEO Ren Qinghua, who stepped into his role early last year. The company statement said that they are departing to better carry out the next phase of the risk disposal work. Ren is a deputy leader of the government working group.

Ren and Gu’s departure could mean that the disposal plan has obtained the green-light from the relevant parties, sources said.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

Support quality journalism in China. Subscribe to Caixin Global starting at $0.99.


You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code