HNA said to face lender questions on $1.4b offer for CWT

The HNA Group logo is seen in this illustration photo on June 1, 2017.
The HNA Group logo is seen in this illustration photo on June 1, 2017. PHOTO: REUTERS

SINGAPORE/KUALA LUMPUR (BLOOMBERG) - HNA Group, the acquisitive Chinese conglomerate, is facing additional questions from banks working on financing its proposed S$1.4 billion takeover of Singapore logistics operator CWT Ltd, people with knowledge of the matter said.

Firms including Malayan Banking and RHB Bank Bhd, which are preparing a loan package to back the acquisition, have been seeking more information from HNA in recent weeks, the people said. The lenders started scrutinising HNA's leverage ratios more closely to assess how much debt they can provide, according to the people, who asked not to be identified because the information is private.

They have also been evaluating whether the Chinese company has ways to support CWT's business and service the debt if there is a downturn in the logistics industry, one of the people said. The lenders will need more time to assess the latest information before finalising the terms of any financing, the people said. Maybank and RHB are still working on the funding, though the situation remains fluid and there is no certainty they will be able to reach an agreement, the people said.

Chinese regulators have been assessing the risks that HNA Group and other serial dealmakers pose to the nation's financial system. Some of the biggest US and Chinese banks have distanced themselves from HNA Group, people familiar with the matter have said, though the company denies that is the case.

The Chinese conglomerate is doing the deal through Hong Kong-listed unit HNA Holding Group Co, which has a market value of about US$409 million (S$556.1 million). It had US$140 million of cash and equivalents at the end of 2016, data compiled by Bloomberg show. Representatives for CWT, HNA Group and RHB declined to comment. A spokesman for Maybank said he could not immediately comment.

HNA Holding plans to finance the CWT purchase through internal resources, external financing and as much as S$1.4 billion of interest-free funds from unspecified associates of its parent company, according to a filing last month.

The Chinese company said on Wednesday it expects to hold a shareholder vote on the deal between the end of August and early September. All the pre-conditions of the deal must be fulfilled or waived by Sept 9 for it to proceed.

Acquiring CWT would give HNA Group a foothold in South-east Asia and help it build a transport network across the region, which is being encouraged as part of the Chinese government's "One Belt, One Road" initiative to revive ancient trade routes.

The deal would also bring a portfolio of warehouse properties and allow HNA to bulk up its commodity trading business.

HNA Group has announced more than US$40 billion of deals since the beginning of 2016, according to data compiled by Bloomberg. US officials are examining its proposed purchase of SkyBridge Capital, the hedge-fund firm founded by White House communications director Anthony Scaramucci, while the European Central Bank is considering a review of the company's stake in Deutsche Bank, people with knowledge of the matter have said.