HNA Unit Bonds Fall to Record Amid Concern of Lender Support

(Bloomberg) -- Bonds of a unit of HNA Group Co. have fallen to record lows after fresh signs that the debt-laden Chinese conglomerate is facing increasing difficulties raising funds.

HNA Group International Co.’s $300 million 8.875 percent securities slid to about 93 cents on the dollar on Monday, the lowest level since they were sold last month, according to Bloomberg-compiled prices. The drop comes after Bloomberg News reported on Friday that people familiar with the matter said HSBC Holdings Plc told its dealmakers to avoid pursuing business for now with the conglomerate, and despite HNA Group saying that it won’t default on borrowings anytime soon. 

Financial strains at HNA Group are growing after a debt-fueled $40 billion acquisition spree across the globe that invited scrutiny from regulators. HSBC joins other firms like Bank of America Corp., Citigroup Inc. and Morgan Stanley, which people familiar with the matter said in July were avoiding advisory and financing work for HNA.

“Bondholders are probably more worried about continued support from the banks,” said Charles Macgregor, head of emerging markets research at Lucror Analytics. 

An HNA representative declined to comment.

Debt Maturities

HNA units have stepped up bond financing in the onshore market in the past month, and also face maturing debt. One of the group’s units Sanya Phoenix International Airport Co. has a 500 million yuan bond ($75.6 million) that matures on Dec. 18, according to Bloomberg-compiled data.

Amid the selloff in HNA’s dollar bonds, some investors are holding off from buying its debt, citing the company’s opaque and complex business.

“It is highly leveraged and there is a lack of certainty as to its long-term business and funding plans,” said Dhiraj Bajaj, Singapore-based portfolio manager at Lombard Odier. “HNA also lacks transparency with regards to its off-balance sheet debt.”’

Bonds of HNA unit Swissport Group Sarl also fell to a record on Monday, with the airport services company’s 264.6 million euros ($312.2 million) of notes due December 2022 down about 3 cents on the euro to 98 cents, according to data compiled by Bloomberg. S&P Global Ratings last week cut Swissport to B-, six levels below investment grade.

--With assistance from Prudence Ho Judy Chen Annie Lee and Tom Beardsworth

To contact the reporter on this story: Denise Wee in Hong Kong at dwee10@bloomberg.net.

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum

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