HNA seeks to repay less than half of claims against airline

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A Chinese conglomerate in debt HNA Group Co. Ltd. unveiled a plan to pay off less than half of the billions in receivables that creditors have demanded from its airline company, after the unit secured a strategic investor earlier this month as part of its bankruptcy restructuring.

Under the provisional plan, the company listed in Shanghai Hainan Airlines Holding Co. Ltd. (600221.SH) and 10 subsidiaries will repay 161.3 billion yuan ($ 25 billion) of the approximately 400 billion yuan claimed by 4,915 creditors, according to A declaration (link in Chinese) filed Monday on the Shanghai Stock Exchange.

Under this plan, creditors will not receive more than 100,000 yuan in a single cash payment, while parent group HNA and other related companies will be responsible for paying two-thirds of the remaining debts, the last third being disbursed by Hainan Airlines under a debt-for-stock swap, with shares priced at 3.18 yuan.

The plan was approved at an investor meeting hosted by Hainan Airlines and its affiliates on Monday, but is still awaiting approval by creditors, whose votes have been postponed until October 20, according to A declaration (link in Chinese).

The plan is the last step in its restructuring after HNA’s creditors seized a court for it to begin a bankruptcy restructuring in January. Under the direction of a government appointed task force, the company is always on the lookout for strategic investors for its retail businesses, including CCOOP Group Co. Ltd., listed in Shenzhen (000564.SZ) and interests in China Shun Ke Long Holdings Ltd, listed in Hong Kong.

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Creditors will be repaid within 10 years, starting in 2022, with interest paid annually on June 20 and December 20. From the second year, the principal will also be reimbursed on December 20 in proportions gradually increasing from 2% to 20%. .

For the remaining debt, interest will be either at the original rate or 2.89% per annum, whichever is lower. The struggling giant’s airline business reported negative net worth of 28 billion yuan in the first half of the year, according to the plan.

Earlier this month, the state-controlled Liaoning Fangda Group Industrial Co. Ltd. became a strategic investor, adding to its portfolio of listed companies in mainland China such as Fangda Carbon New Material Co. Ltd. (600516.SH), Zhongxing Shenyang Commercial Building Group Co. Ltd. (000715.SZ) and Northeast Pharmaceutical Group Co. Ltd. (000597.SZ).

Another state-owned company, Hainan Development Holdings Co. Ltd., also announced plans to take a stake in HNA’s airport unit earlier this month.

Founded in 1989 as a state-owned airline before becoming a private-owned limited company in 1992, HNA is China’s fourth largest airline. It has gained worldwide attention by investing in international giants like Hilton Worldwide Holdings Inc., airport retail giant Dufy America Inc. and Deutsche Bank AG.

The company’s debt-fueled acquisition strategy hit a hard landing after the government tightened funding rules and oversight of overseas asset purchases in 2017. At the end of 2017, assets of the company had swelled to 1.23 trillion yuan with a total debt of 740 billion yuan.

On Friday evening, HNA Chairman Chen Feng and CEO Tan Xiangdong were taken over by the police for unspecified crimes, according to an article posted on the company’s official WeChat account.

Contact reporter Manyun Zou ([email protected]) and editor Flynn Murphy ([email protected])

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