HNA Credit Assessment Cut by S&P on Significant Debt Bills

(Bloomberg) -- Debt-laden Chinese conglomerate HNA Group Co. had its credit assessment cut for the second time in less than three months by S&P Global Ratings, which cited significant debt maturities amid deteriorating liquidity.

Separately, some HNA directors and top executives have purchased offshore dollar bonds guaranteed by the group, according to an emailed statement Wednesday that didn’t disclose the amount. The company is in a "very healthy" financial position, it said.

S&P lowered HNA’s credit profile to ccc+ from b. Group credit profile assessments are based on publicly available information and don’t incorporate the same access to management meetings and data S&P would have in an official rating of an issuer.

“While it appears to have made some progress, and has valuable assets and highly liquid stakes in public traded companies, in our view HNA Group is dependent upon favorable market conditions to meet its upcoming financial commitments," S&P said in a report. “While we understand that HNA Group continues to have access to capital markets and appears to have the support of some banks, in our view it is unclear that this will be sufficient for the company to meet its upcoming obligations."

Investors have grown increasingly concerned about strains at HNA Group as the once-voracious hunter of global trophy assets seeks to sell assets to repay debts. HNA missed payments to several Chinese banks and its bond yields have in recent months traded at times at levels that are often considered distressed.

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). The company 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.

S&P mentioned the cut in a rating downgrade report on Pactera Technology International Ltd., a subsidiary of HNA. It also lowered the issuer credit rating on unit Gategroup Holding AG.

Read more about a previous cut to HNA Group’s credit assessment by S&P

After spending tens of billions of dollars investing in big stakes in Deutsche Bank AG to skyscrapers in New York, the conglomerate is reversing course as Chinese authorities sour on overseas acquisitions and seek to cut excessive leverage throughout the economy.

©2018 Bloomberg L.P.

With assistance from Judy Chen, Blake Schmidt, Prudence Ho

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