Bank of America halts deals with HNA

A Bank of America logo is seen in New York City, on Jan 10, 2017.
A Bank of America logo is seen in New York City, on Jan 10, 2017. PHOTO: REUTERS

Move sparks worries that HNA's takeover offer for S'pore-listed CWT could be affected

Bank of America has told investment bankers to stop working on transactions with HNA Group for now, amid growing concerns over the acquisitive Chinese conglomerate's debt levels and ownership structure, Bloomberg has reported.

The report, citing unnamed sources, said the US investment bank has joined other Wall Street firms - including Citigroup Inc and Morgan Stanley - that are largely steering clear of advising and financing the group on deals as they have been unable to get necessary internal approvals.

Bank of America advised HNA on several attempted overseas acquisitions in recent years, the sources said.

The decision has affected deals the firm was working on for HNA, including the planned Singapore initial public listing of HNA Commercial Reit.

The Reit had been expected to raise some $700 million.

Senior officials at Bank of America's Merrill Lynch unit communicated internally last month that bankers should not currently pitch for new acquisitions and fund-raisings, according to people familiar with the matter.

Scrutiny of Chinese companies came into focus this week after the people said that China plans to cut off some funding for billionaire Wang Jianlin's Dalian Wanda Group, concluding the conglomerate breached restrictions for overseas investments.

The move by Bank of America to halt deals with HNA has sparked worries that the group's takeover offer for Singapore-listed logistics provider CWT could be derailed.

CAUTION ADVISED

With no visibility over the outcome of the probe on HNA, it makes sense for shareholders to reduce their risk by selling part of their holdings in the market with risk-reward skewed to the downside.

OCBC INVESTMENT RESEARCH ANALYST EUGENE CHUA, noting that investors should stay cautious as China's banking regulator was also reported to be probing into overseas loans made to HNA.

HNA in April tabled a pre-conditional general offer and said it is offering $2.33 in cash for each CWT share, in a deal that values one of Singapore's largest logistics groups at about $1.4 billion.

CWT declined to comment when asked by The Straits Times yesterday, while HNA did not provide a response by press time.

OCBC Investment Research analyst Eugene Chua said in a note earlier this month that HNA's recent update on the deal - that the anti-trust pre-conditions have been satisfied - brings the voluntary general offer a step closer to materialising.

But Mr Chua also noted that investors should stay cautious as China's banking regulator was also reported to be probing overseas loans made to HNA, "which we believe creates uncertainty over whether the deal will go through".

"With no visibility over the outcome of the probe on HNA, it makes sense for shareholders to reduce their risk by selling part of their holdings in the market with risk-reward skewed to the downside," he said, though adding that investors should accept the offer once the formal voluntary general offer is made.

CWT shares closed 1.8 per cent or four cents lower at $2.13 yesterday, after the news broke.

A version of this article appeared in the print edition of The Straits Times on July 21, 2017, with the headline 'Bank of America halts deals with HNA'. Print Edition | Subscribe