HNA's haphazard selloff keeps getting trickier

[HONG KONG] A haphazard selloff at HNA Group keeps getting trickier. The Chinese conglomerate is pushing ahead with the flogging of stakes in an online lender, life insurer and brokerage. Few signs of a clear strategy and market perceptions of creditor clout will make it harder to profitably unwind HNA's US$50 billion buying spree. Falling asset prices aren't helping, either.

The aviation-to-finance conglomerate this week showcased a motley collection of at least 20 assets to bankers in Beijing, Reuters reported. It follows news last month that HNA Technology is in talks to sell Ingram Micro, an American electronics distributor acquired in 2016 for US$6 billion. Pactera, an IT outsourcing company, also is being shopped, other media sources indicate.

HNA is unloading a slew of holdings to pay down debt, which totalled just under US$100 billion as at the middle of 2018, according to Reuters. Chairman Chen Feng told Chinese media in November his company had shed nearly 300 billion yuan (S$59.5 billion) of assets at that point last year.

The company says it intends to streamline operations around aviation. That's hard to square with HNA selling a controlling stake in Urumqi Air. Others including Lucky Air may also be on the block, though HNA denied reports that Hainan Airlines is for sale.

Adding further doubts to the existence of a coherent vision is the growing sense that lenders are driving the agenda. China Development Bank has set up shop at the group's headquarters in Hainan to lead a team monitoring the sales, according to Reuters and The Wall Street Journal.

That suggests cash may take precedence over strategy. As a result, suitors could drive a harder bargain. HNA also faces a fresh challenge with growth cooling and valuations shrinking both at home and abroad.

It is looking increasingly unlikely, for example, that HNA will be able to turn a sizeable profit on some of its Hong Kong properties bought near the height of the boom. The same is true of companies like Dianrong in the struggling peer-to-peer lending business. As prospective buyers rummage through what's on offer from HNA's earlier acquisition binge, what actually will become clear soon is what price the seller is willing to pay.

China's HNA Group met bankers in Beijing on Jan 8 to showcase assets for sale, including several properties, as well as stakes in Bohai Life, peer-to-peer lender Dianrong and other financial projects, Reuters reported.

The meeting comes after Reuters reported in December that China Development Bank, a state-owned policy lender, was leading a team to oversee the company's asset sales and leave it with only so-called "core" assets, citing sources.

REUTERS