HNA announces to its creditors that it will receive $ 5.9 billion in strategic investments

BEIJING / SHANGHAI, Sept. 27 (Reuters) – Chinese group HNA to benefit from 38 billion yuan ($ 5.88 billion) strategic investment after restructuring, which will go to eleven of its entities, including flagship company Hainan Airlines (600221.SS), two of the sources told Reuters on Monday.

Gu Gang, the group’s party secretary and head of the government-led task force on HNA’s liquidity issues, disclosed the investment at a meeting of his creditors, said the two sources who were aware of the meeting discussions.

He did not specify where the investment came from, but said about 25 billion yuan of the strategic investment would go to Hainan Airlines to replenish its liquidity, they said, asking not to be named because they were not allowed to speak to the press.

Reuters reported earlier that the meeting was scheduled for Monday and that HNA would reorganize the 11 entities into a single group. Read more

HNA did not immediately respond to a request for comment.

Hainan Airlines said in a separate statement Monday that it would use funds from strategic investors and future operating income to repay debts of the airline and the other 10 entities.

In the 2010s, HNA used a wave of global $ 50 billion acquisitions, mostly fueled by debt, to build an empire with stakes in companies from Deutsche Bank (DBKGn.DE) to Hilton Worldwide.

But its spending has caught the attention of the Chinese government and foreign regulators. As concerns grew over its growing debts, it sold assets such as airport services company Swissport and electronics distributors Ingram Micro to focus on its airline and tourism business.

HNA was put into bankruptcy in February, and a task force set up by the government of her home province of Hainan looked into the company’s liquidity problems.

Late Friday, the company said its chairman and chief executive officer was arrested by Chinese police for suspected criminal offenses. Read more

Gu also said in Monday’s meeting that Hainan Airlines had drawn up a debt restructuring plan with major domestic and foreign aircraft lessors, which had granted substantial exemptions on its debts, the sources said.

Hainan Airlines’ interest-bearing debts will fall to 60 billion yuan after the reorganization, its total assets will rise to 170 billion yuan, and its debt ratio will drop to 81% after the debts are cleared, they said.

A document detailing HNA’s restructuring plan said creditors of the 11 entities said they owed 397.2 billion yuan ($ 61.43 billion) in unpaid debt. Only 161.29 billion yuan has been recognized by the court and will enter the restructuring process.

Unsecured creditors who do not owe more than 100,000 yuan ($ 15,465.01) in principal will be repaid in full. Any debt above that level will be paid partly by HNA and other parties, and partly in shares of Hainan Airlines, according to a document seen by Reuters.

The creditors’ committee has yet to approve the plan, according to the document.

($ 1 = 6.4662 Chinese renminbi yuan)

Reporting by Cheng Leng and Yilei Sun in Beijing, Samuel Shen and Brenda Goh in Shanghai; Editing by Gerry Doyle and Barbara Lewis

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