HNA Versus S&P: Debate Over Chinese Group's Finances Heats Up

(Bloomberg) -- S&P Global Ratings stepped up its scrutiny of HNA Group Co. by cutting its credit assessment for the second time in less than three months as the debt-laden Chinese conglomerate renewed a defense of its "very healthy" finances.

Late Tuesday, S&P said it lowered HNA’s unofficial credit score by two notches to ccc+, or seven levels deep into junk territory, citing the group’s deteriorating liquidity profile. The following day, the Chinese group issued a statement touting its soaring assets and how some executives bought HNA-backed bonds because of their full confidence in the conglomerate’s prospects. The statement from HNA didn’t mention S&P.

The episode illustrates the widening divergence between the HNA narrative coming from the company and those looking in from outside. The group, which in recent years spent billions investing in everything from big stakes in Deutsche Bank AG to skyscrapers in New York, is now seeking to dispose of many of those assets as signs mount that debts piled up beyond the company’s means.

Investors have expressed concerns recently, driving HNA-related bond yields at times to levels that are often considered distressed. The yield on HNA’s yuan-denominated bond due in 2019 was last at 12.6 percent, according to exchange data, about twice that on securities with credit scores considered speculative in China.

For HNA, the glass is more half full. The group said in its latest statement that its assets soared to about $237 billion -- more than at BlackRock Inc. -- and sales climbed to around $110 billion -- similar to what Google-parent Alphabet Inc. generated -- last year. HNA also pointed out it recently clinched a 20-billion-yuan ($3.2 billion) credit line from China Citic Bank Corp. and is cooperating with Wall Street giants such as UBS Group AG, Barclays Plc and JPMorgan Chase & Co.

"The group is currently in a very healthy financial position," HNA said in its statement.

A representative for HNA didn’t immediately respond to a request for additional comment.

The company also signaled that liabilities soared to about $140 billion last year, which would rank among the highest levels in China.

In other HNA news in the past 24 hours:

  • HNA got an extension for a loan taken out for its Gategroup acquisition
  • HNA has $6 billion gauntlet of bond redemptions this year
  • Two airlines backed by HNA have fallen behind schedule on aircraft lease payments
  • China’s debt-laden dealmakers are being eyed by restructuring firms
  • SkyBridge executive says its sale to HNA will be determined this month, Reuters reports
  • HNA Capital pledges more shares of Bohai Capital for financing
  • HNA’s Swissport gets loan for Aerocare acquisition
  • HNA’s Gategroup gets credit rating downgrade by S&P
  • HNA’s Pactera also downgraded by S&P
  • HNA Infrastructure says major holder pledged shares

©2018 Bloomberg L.P.