HNA Offers Airline Vouchers to Repay Investors Instead of Cash

(Bloomberg) -- A financing platform under HNA Group Co. is offering investors air tickets rather than cash as repayment, the latest sign of the financial stress the Chinese conglomerate is under despite a slew of asset sales.

Shenzhen-based Qianhai Air & Shipping Exchange that sells wealth management products to retail investors online, is offering tickets from Hainan Airlines or Grand China Air to repay what it owes, it said in a statement. The flights can be for both domestic and overseas travel and are valid for five years.

The offer highlights the continuing pressure HNA Group faces as it struggles to reduce one of China’s biggest piles of debt. It has agreed to sell more than $22 billion in properties and shares this year to stay in business. Its unit HNA Innovation Co. failed to repay 300 million yuan ($43.2 million) of trust loans due Sept. 10.

“HNA is fully committed to meeting its obligations and we will actively oversee the repayment to all investors as detailed in Qianhai Air and Shipping Exchange’s public filing,” said a HNA spokesperson in an emailed reply to Bloomberg News.

The flight packages are worth 5,000 yuan ($719) for investors meant as repayment for their investments. Last week, a pork producer came up with an innovative way to repay its debt. Chuying Agro-Pastoral Group Co. said holders of 271 million yuan of its debt agreed to take ham or pork gift packages instead of interest payments.

“Issuers are certainly trying innovative ways to resolve their tight liquidity situation,” said Anne Zhang, executive director for fixed income, currencies and commodities. “Kudos to their goodwill, although creditors would still appreciate financial means.”

Such offers to pay in kind highlight the risks international investors face when entering the Chinese local debt market, said Judy Kwok-Cheung, director of fixed income research at Bank of Singapore. Investors should factor this into their expectation of legal claims against the onshore distressed issuers to assess the credit risks before making investments, she said.

©2018 Bloomberg L.P.