HNA bankruptcy removes creditors’ hurdle in $ 170 billion debt restructuring



(Nikkei Asia) – HNA Group took a big step forward over the weekend in what is believed to be China’s biggest bankruptcy case as creditors gave the green light to an investment by a lesser-known conglomerate that has been involved in a series of turnarounds.

At 1.1 trillion yuan ($ 172 billion), HNA’s debt dwarfs that of China’s other high-profile bankruptcy cases, including the roughly 200 billion yuan of Baoshang Bank and Tsinghua Unigroupis 160 billion yuan. Despite recent progress, the conglomerate is expected to continue to face an uphill battle in its restructuring process, particularly with the Hainan Airlines headunit still suffering from the impact of the coronavirus on travel.

HNA Group said on Saturday that creditors voted to approve debt restructuring plans formulated by the core businesses of his group, including Hainan Airlines, real estate developer Hainan Infrastructure Development Group and retailer CCOOP Group. The plans will require formal court approval.

Much attention has been paid to the fate of Hainan Airlines in particular, a key carrier offering extensive service in southern China and beyond. Its rehabilitation plan is based on an injection of liquidity from a strategic investor, the transporter having chosen Liaoning Fangda Group Industrial as its choice.

The group is expected to become Hainan Airlines’ largest shareholder as part of its 38 billion yuan investment, Chinese media reported.

Fangda is an industrial conglomerate operating in carbon, steel and more, and it owns several publicly traded units, including Fangda Carbon New Material and Fangda Special Steel Technology. It has also invested in and helped rehabilitate a number of struggling businesses in the past.

The conglomerate employs more than 60,000 workers, with revenues and assets exceeding 120 billion yuan in 2020. This will be its first foray into the aviation industry.

Yet relatively little is known about the inner workings of Fangda. Founder Fang Wei rarely appears in the media and is far from a household name.

Born in the 1970s, Fang got his start selling scrap metal in Liaoning Province, according to The Beijing News. Eventually, making a fortune by acquiring mining rights for iron ore, he created Fangda around 2000 and the group acquired a struggling carbonaceous materials manufacturer in 2002. It has since continued to take over large companies, forging itself the reputation of “serpent that swallows elephants”. . ”

As the group grew through acquisitions, Fang was chosen as the representative of the National People’s Congress in 2013, later losing his membership due to an allegation of corruption.

Despite Fangda’s war chest and track record, there are growing concerns about the group’s ability to stabilize Hainan Airlines. Travel demand has yet to fully recover from the coronavirus pandemic, and the carrier suffered a net loss of 880 million yuan between January and June.

Shadows also hang over HNA Group, which owns around 70% of the group’s debt and has assumed part of the obligations of Hainan Airlines and other units. The company’s assets include hotels and listed companies. But much of his holdings would come in the form of shares in aircraft leasing company Avolon Holdings, which, like Hainan Airlines, is vulnerable to downturns in the aviation industry.

This story was first published in Nikkei Asia.

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