HNA's Fire Sale Gets Into Full Swing From Hong Kong to London

(Bloomberg) -- HNA Group Co., the once-voracious hunter of global trophy assets, is seeking to sell more than $6 billion in properties worldwide as pressure intensifies for the Chinese conglomerate to speed up disposals so it can repay its debts.

The group on Tuesday said it agreed to sell two plots of land in Hong Kong it bought less than a year ago for HK$16 billion ($2 billion) to the city’s second-richest man. HNA is also said to have been in talks to sell a pair of office buildings in London’s Canary Wharf district it bought for more than $500 million and offering a raft of properties in the U.S. valued at about $4 billion.

After spending tens of billions of dollars investing in big stakes in Deutsche Bank AG to skyscrapers in New York, the conglomerate that once symbolized China’s insatiable appetite for global assets is reversing course after the government soured on overseas acquisitions and debts piled up beyond the company’s means. The group is said to have told creditors it could have a liquidity shortfall of at least 15 billion yuan ($2.4 billion) this quarter and that it’s targeting about 100 billion yuan in asset sales during the first half.

In Hong Kong, HNA plans to sell the properties to billionaire Lee Shau Kee’s Henderson Land Development Co. by Feb. 14 for about 12 percent more than what local land registry records show HNA had spent. HNA bought those plots, along with two others, at the former Kai Tak airport area for a total HK$27.2 billion between November 2016 and March last year, outbidding local developers for sites that were among the most hotly contested during that period.

HNA's Fire Sale Gets Into Full Swing From Hong Kong to London

"Without a doubt, HNA is making a strategy U-turn," said Warut Promboon, managing partner at credit research firm Bondcritic Ltd. "Developers do not buy land to only make 12 percent gross profit, in our view. The fact that HNA simply could not develop the land into residential properties indicates rising execution risk within the group."

Separately, HNA has held preliminary talks with investors about selling a pair of Canary Wharf properties at 30 South Colonnade and 17 Columbus Courtyard, people with knowledge of the matter have told Bloomberg. Firms including Brookfield Asset Management Inc. are considering making bids but HNA is unlikely to recoup the 366 million pounds ($507 million) it paid for the two buildings because the tenants of both properties intend to leave and prices have fallen in the district since the Brexit vote, the people said. HNA is engaged in piecemeal discussions with bidders interested in multiple buildings around the world, they said.

Elsewhere:

  • The Chinese conglomerate is selling properties valued at about $4 billion -- including the 245 Park Ave. skyscraper it bought less than a year ago for one of the highest prices ever paid for a building in New York -- according to a marketing document seen by Bloomberg. The company is also looking to sell commercial properties in Chicago, San Francisco and Minneapolis.
  • In late January, HNA agreed to sell a Sydney office building to Blackstone Group LP for A$205 million ($161 million). 

Globally, HNA owned more than $14 billion in real estate properties as of the end of last year, according to estimates by Real Capital Analytics Inc.
Read more: potential assets on the block in China’s sale of the century

HNA's Fire Sale Gets Into Full Swing From Hong Kong to London

While property sales may be grabbing the headlines recently, HNA had more than $190 billion in assets as of June -- more than at American Express Co. The group also held almost $25 billion of shareholdings, according to data compiled by Bloomberg.

It recently trimmed its stake in Deutsche Bank, though it remained the German lender’s biggest shareholder. HNA has also either sold or put up for sale stakes in Spanish hospitality firm NH Hotel Group SA, U.S. shipping company Dorian LPG Ltd., China Dragon Securities Co. and Tianjin Airlines. The group is also planning initial public offerings for Gategroup Holding AG and Swissport International in Switzerland.

Behind all these disposals are HNA’s debts, which have stood out in recent months. As of the end of June, it had 185.2 billion yuan of short-term debt -- exceeding the sum of its cash and earnings. HNA’s earnings can’t cover its interest expenses, which according to data compiled by Bloomberg, have surged to levels topping those of any non-financial Chinese company and continue to rise.

Such finances have drawn increasing skepticism from bond investors whether asset sales and lender lifelines will be enough to help the conglomerate roll over borrowings.

The yield on HNA’s yuan-denominated bond due in 2019 has almost doubled this year to 14.2 percent, according to exchange data. That’s about three times higher than the average yield on other notes with similar AAA local ratings, and twice that on securities with credit scores considered junk in China.

Still, HNA got some much-needed relief last week when it announced state-run China Citic Bank Corp. will offer the group a 20 billion yuan ($3.2 billion) credit line.

HNA's Fire Sale Gets Into Full Swing From Hong Kong to London

“With investor risk appetites more subdued in the wake of rising rates and widening credit spreads, it is difficult to envision HNA and its subsidiaries being able to tap either the onshore or offshore bond markets over the near future,” said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd.

HNA isn’t alone in feeling the heat. Blackstone has held initial discussions about bidding for Anbang Insurance Group Co. assets -- including New York’s Waldorf Astoria hotel -- in a sale overseen by the Chinese government, people with knowledge of the matter have said.

Elsewhere, billionaire Wang Jianlin, whose group controls AMC Entertainment Holdings Inc. and was once China’s richest man, is retreating from previous ambitions to build an entertainment empire that could challenge Walt Disney Co.

To contact Bloomberg News staff for this story: Prudence Ho in Hong Kong at pho83@bloomberg.net, Judy Chen in Shanghai at xchen45@bloomberg.net, Justina Lee in Hong Kong at jlee1489@bloomberg.net.

©2018 Bloomberg L.P.

With assistance from Prudence Ho, Judy Chen, Justina Lee