China Plans Sale of HNA’s Non-Aviation Assets Via Trust

(Bloomberg) -- The Chinese government plans to dispose of HNA Group Co.’s non-aviation assets through a trust, according to people familiar with the matter, as the provincial authorities that took control of the once high-flying conglomerate last year move ahead with its restructuring.

The trust will manage the sale of HNA’s assets not in the aviation space, a process that will likely take some time, said the people, asking not to be identified because the plan is yet to be made public. A state-backed entity will become a strategic investor in what’s left of HNA, they said.

Under the plan, HNA’s creditors will be allowed to swap their debt into equity in the new, pared-back company or gain a stake in the trust managing the divestment of the other assets, depending on their lender status, the people said. The plan has been approved by Chinese regulators and is expected to be implemented soon, they said.

A spokesman for HNA didn’t immediately respond to requests for comment, while calls and an email to the Hainan government weren’t returned. Rumors about HNA’s situation have been swirling for days, with Hu Xijin, the editor-in-chief of China’s state-run Global Times newspaper, tweeting Friday that HNA Group’s operations are “coming to an end,” and that an announcement on restructuring could come at any time.

Founded as an airline in the 1990s by chairman Chen Feng, HNA emerged from near obscurity half a decade ago to become the standard bearer for a cabal of Chinese empire builders that borrowed rapidly buy up trophy assets around the globe. Headquartered in China’s Hainan Island, HNA became the top shareholder of Deutsche Bank AG and Hilton Worldwide Holdings Inc. on the back of an acquisition spree that left it with one of the largest debt loads in the world.

Luxury Properties

While the conglomerate has been shedding billions of dollars worth of investments amid crushing repayment obligations since early 2018, it still has an assortment of assets, including Hainan Airlines Holding Co. Its non-aviation portfolio includes luxury properties and hotels in mainland China and overseas, such as the 648-foot skyscraper 245 Park Avenue in New York and part of an artificial island off Hainan called Pearl Island.

HNA was already planning to pivot back to its aviation and tourism roots when the coronavirus hit China early last year, with the shutdown in air travel accelerating the company’s demise. As the pandemic hammered one of its last viable businesses, the government of Hainan seized control last February, appointing new leaders and assuming management of HNA’s debts.

Last week, a government-appointed working group finalized a risk disposal plan and two senior executives, including Executive Chairman Gu Gang, resigned. On Jan. 27, a key Communist Party-led committee overseeing HNA left Chen off a list of members, raising doubts over his future at the group he founded and brought to the world stage.

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With assistance from Bloomberg