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Debt-laden HNA met with Chinese banks for financing talks

[HONG KONG] Debt-laden Chinese conglomerate HNA Group met with Chinese lenders for talks on financing next year, after borrowing costs surged in recent weeks and prompted some units to scrap bond offerings.

Representatives from eight Chinese banks' branches in the southeastern province of Hainan, where HNA is based, met with the group Wednesday on providing credit support in 2018, the company said in a statement posted on its WeChat account. It didn't say how much in credit lines the lenders will provide next year. Group unit bonds and shares rose.

"While the devil is in the details, HNA is a company with aggressive leverage and liquidity challenges," said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd. "The fact that banks continue to engage with them with respect to prospective funding should be viewed as a positive."

HNA Group has faced surging financing costs after its debt-fuelled US$40 billion acquisition spree across the globe sparked regulatory scrutiny and put it in the crosshairs of a Chinese government that's clamping down on capital outflows.

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In recent weeks, S&P Global Ratings and Fitch Ratings have voiced concerns about at least four companies because of their ties with HNA. Group flagship Hainan Airlines Holding cancelled a bond sale, another unit scrapped a share offering and HNA subsidiaries have paid some of their highest borrowing costs ever.

The group last month pushed back repayment of a loan for three months, as it struggled with bloating debt.

An HNA representative couldn't immediately comment.

HNA Group executives, including co-chairmen Chen Feng and Wang Jian, are planning to buy shares in Bohai Capital Holding after the Shenzhen-listed leasing unit's stock fell by more than 30 per cent from its peak this year, according to exchange filings this week.

HNA Group has so far secured total credit lines of more than 800 billion yuan (S$163.32 billion) from financial institutions, and has unused credit lines of 310 billion yuan, it said.

US dollar bonds due in 2018 of an HNA unit rose 4 US cents to 95 US cents on the dollar as of 1.47pm in Hong Kong, the biggest gain since the bonds were sold in 2015, according to prices compiled by Bloomberg. HNA Holding Group's Hong Kong-listed shares jumped as much as 10.3 per cent, the biggest increase in seven weeks.

Banks that attended the meeting held at HNA included China Development Bank, Export-Import Bank of China, Bank of China, Agricultural Bank of China, Industrial & Commercial Bank of China, China Construction Bank, Bank of Communications and Shanghai Pudong Development Bank.

"HNA Group has clout in the onshore banking market and it is showing it," said Steve Wang, a senior credit analyst at Citic CLSA Securities in Hong Kong. "This is a shot in the arm for shaky hands fighting hard to find a grip on their HNA bonds."

HNA's statement that Chinese lenders continue to support the company is "mildly positive" but concerns over the group remain, according to credit research firm Bondcritic.

The main problems the group faces include risks over refinancing as well as an opaque corporate structure, said Warut Promboon, managing partner at Bondcritic.

BLOOMBERG

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