海航集团| HNA Launches $1.5B Private Equity Fund

HNA’s Chen Feng would like to manage your assets for you

Needing to pay off $29 billion in financial liabilities by June 30th, embattled Chinese conglomerate HNA is seeking investors for a $1.5 billion investment vehicle so that the group can continue the acquisition streak that generated its current debt load, but without further burdening its own balance sheet, according to a Reuters account.

With HNA Group subsidiary HNA Aviation and Tourism Group set to act as a general partner, the Overseas Aviation and Tourism Industry Fund will target acquisitions of overseas travel, aviation and real estate assets. A group-related limited partner would initially commit about $100 million to $150 million to the fund.

The group’s aviation and tourism division has already started recruiting limited partners for the fund this month.

Invest With the Group That Regulators Watch For

Should the woe-beset Hainan group succeed in finding limited partners to co-invest, the mainland conglomerate might still find it difficult to buy assets overseas as governments at home and abroad are ramping up their scrutiny of the debt-ridden company.

Last week, the New Zealand government explained that the country’s Overseas Investment Office had blocked HNA’s $462 million acquisition of UDC Finance, a unit of ANZ Bank, due to concerns about HNA’s undeclared use of share pledging, according to the Financial Times.

In the last year, the group has also faced challenges from its own government with a pair of HNA deals having run aground on the Chinese government’s heightened barriers to capital outflow. In July 2017, HNA was forced to walk away from a proposed $264 million acquisition of London-based International Currency Exchange, and its bid to purchase a larger stake in a Swedish hotel group Rezidor Hotel Group AB was hindered after Beijing authorities baulked at authorising further overseas cash transfers, according to Reuters.

HNA Gaining Experience in Speedy Asset Disposal

HNA has sold three plots in Hong Kong’s Kai Tak for $2.8 billion

When approaching potential investors, HNA at least can tout a track record of being one of the region’s fastest buyers, and it is currently gaining experience in high-speed asset disposal.

Just last week, HNA sold down its stake in Deutsche Bank to 7.9 percent, from its earlier 9.9 holding, and after the stock had lost around 25 percent of its value in the past year. The disposal came despite earlier assertions that HNA had no plans to offload shares in the German institution.

The stake sale followed HNA’s disposal of a pair of logistics projects in Hainan to mainland developer Sunac for RMB 1.9 billion ($300 million) last month. The Hainan conglomerate also sold three residential land plots in the city’s former airport site in Kai Tak to Wheelock and Company for HK$6.36 billion ($811 million), and Henderson Land Development for HK$16 billion ($2 billion) in March and February respectively.

The cash-strapped company is also said to be marketing nine properties including office buildings and hotels in Beijing and Shanghai for $2.2 billion. The properties include the 60-storey Shanghai HNA Tower on Lujiazui’s Puming Road, the Renaissance Shanghai Pudong Hotel.

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