HNA Widens Aviation Asset Sales, Paring Back Core Business

(Bloomberg) -- The ­flagship aviation unit of debt-laden Chinese conglomerate HNA Group Co. is selling more assets from its core airlines and related services business, evidence that it’s leaving nothing untouched in the race to raise cash to pay down debts.

Hainan Airlines Holding Co. said Wednesday it has agreed to sell a 40 percent stake in an un­profitable local carrier to the Urumqi government, according to a company filing. The carrier said the deal could be settled by cash, tangible assets or equities, without disclosing terms.

Key Insights

  • HNA has been reversing a buying spree by selling everything from shares to buildings, and has recently been looking to sell more aviation assets -- businesses it has defined as core operations.
  • The group is also planning to exit its investment in Deutsche Bank AG and is seeking a buyer for its $1 billion container-leasing business Seaco, people familiar with the matter have said. It also plans to surrender eight floors of office space in Hong Kong and is selling stakes in various Chinese units, Bloomberg News reported last month.
  • Since the beginning of this year, HNA has disposed of close to $20 billion in assets and has agreed to sell around $3 billion more, according to data compiled by Bloomberg

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Other sales and planned disposals of aviation assets include:

  • An August agreement to divest a 30 percent stake in the Avolon Holdings Ltd. jet-leasing unit, which is worth $2 billion.
  • In July, Temasek Holdings Pte. and RRJ Capital agreed to invest an unspecified amount in an airline caterer owned by HNA Group Co. The two investors subscribed to a five-year, mandatory exchangeable bond that would give them a 49 percent stake in Gategroup Holding AG upon conversion into shares.
  • Last month, people familiar with the matter said HNA is in advanced talks to sell its Swiss airport-cargo handler to a Canadian asset manager. Brookfield Asset Management Inc., based in Toronto, has emerged as the preferred bidder for Swissport International, the people said, asking not to be identified because the discussions are private. Swissport -- which also offers ticketing, cabin cleaning and aircraft maintenance -- could fetch more than $3 billion, the people said.
  • HNA has been trying for months to offload jetliners it ordered from Airbus SE
  • HNA said it would ­retain management rights in Urumqi Air after the deal, showing that it is still unwilling to fully give up on assets in its core area. If the collaboration with the government goes well, this asset light business model could potentially be pursued by other HNA units in the future.

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