More HNA Units Plunge as Share Resumptions Accelerate

(Bloomberg) -- Another two HNA Group Co. units tumbled on Friday, becoming the debt-laden Chinese conglomerate’s latest subsidiaries to plunge this week after lifting the months-long halt of their shares.

Flagship Hainan Airlines Holding Co. dropped by the 10 percent daily limit to 2.91 yuan, its lowest close in more than three years, and CCOOP Group Co. also fell by 10 percent to a four-year low on Friday in Shanghai and Shenzhen. Two of other HNA units -- Bohai Capital Holding Co. and HNA-Caissa Travel Group Co. -- resumed trading this week. Three HNA units remain halted.

The four companies -- one of which was suspended as far back as November -- have lost almost $3 billion in market value since they resumed trading this week. The units of one of China’s most indebted business groups had cited major restructurings for the suspensions, though analysts pointed out there may be other motives given that Chinese companies have a history of using trading halts to prevent their stocks from falling further.

The resumption came as Hainan Airlines plans to raise as much as 7 billion yuan ($1 billion) by selling shares to investors, including an arm of Singaporean state-investment company Temasek Holdings Pte, as part of a restructuring.

HNA’s other suspended shares are:

NameHalted Since
HNA Investment Group Co.Jan. 24
Hainan HNA Infrastructure Investment Group Co.Jan. 23
HNA Technology Co.Jan. 12

Fortunately for HNA, which pledged shares in all of its suspended units as collateral for borrowings, the risk of margin calls isn’t high even if the stocks continue to fall. China’s government recently restricted forced liquidations of pledged shares, according to people familiar with the matter.

The government restrictions "will help fend off immediate margin calls on loans," said Zhang Gang, a strategist at Central China Securities Co. "But HNA’s problems are complex. They’re more than just margin calls."

Beyond HNA, more companies in China have resumed trading this month. The total number of suspensions fell to below 170 this month, heading for its lowest end-of-month tally since March 2015, according to data compiled by Bloomberg.

HNA has sold more than $17 billion in assets to pay debt this year after it spent tens of billions of dollars in a buying spree that resulted in the group becoming the largest shareholder of Deutsche Bank AG and Hilton Worldwide Holdings Inc.

Despite its success in selling out of Hilton and disposing of various real estate properties globally, borrowing costs for HNA are still high. For example, Bohai Capital last month agreed to pay 7 percent interest -- a record for the company -- for a bond, according to data compiled by Bloomberg.

A representative for HNA said the group will work closely with the publicly traded firms as part of HNA’s overall strategy to streamline its asset portfolio and improve overall financial performance.

"The stocks eventually have to resume trading one day, it’s just probably a better timing for them to do now," said Alex Wong, a fund manager at Ample Capital in Hong Kong.

©2018 Bloomberg L.P.