We can manage cash crunch, says HNA chairman

HNA's flagship Hainan Airlines Holding Co; Bohai Capital Holding Co, the parent of aircraft leasing firm Avolon; and Tianjin Tianhai Investment, which controls California-based Ingram Micro Electronics, have suspended trading pending major announceme
HNA's flagship Hainan Airlines Holding Co; Bohai Capital Holding Co, the parent of aircraft leasing firm Avolon; and Tianjin Tianhai Investment, which controls California-based Ingram Micro Electronics, have suspended trading pending major announcements. Ingram Micro is part of US$50 billion (S$66 billion) worth of transactions the conglomerate announced over the last two years.PHOTO: REUTERS

HAIKOU • HNA group chairman Chen Feng has expressed confidence that China's aviation-to-financial services conglomerate will manage its cash crunch, and continue to receive support from banks and other financial institutions this year.

The liquidity problem exists "because we made a big number of mergers", even as the external environment became more challenging and China's economy "transitioned from rapid to moderate growth", impacting the group's access to new financing, Mr Chen told Reuters in a rare meeting.

"Rate hikes by the Federal Reserve and deleveraging in China caused a liquidity shortage at the end of the year for many Chinese enterprises," he said. "We're confident we'll move past these difficulties and maintain sustained, healthy and stable development."

It was a rare acknowledgement by a top company official that HNA is facing financing problems. In recent weeks, local banks have privately and publicly voiced concern after HNA failed to repay some obligations, including aircraft lease payments, and as surging debt drove up the cost of the group's short-term fundraising to new highs.

Significant moves are expected. HNA's flagship Hainan Airlines Holding Co; Bohai Capital Holding Co, the parent of aircraft leasing firm Avolon; and Tianjin Tianhai Investment, which controls California-based Ingram Micro Electronics, have suspended trading pending major announcements.

Ingram Micro, which HNA bought for roughly US$6 billion (S$8 billion), is part of the US$50 billion worth of transactions the conglomerate announced over the last two years. They also included big stakes in Hilton Hotels Worldwide Holdings and Deutsche Bank.

HNA chief executive Adam Tan said in November that the company was selling some real estate and other assets to improve liquidity and comply with national policy.

It was a rare acknowledgement by a top company official that HNA is facing financing problems. In recent weeks, local banks have privately and publicly voiced concern after HNA failed to repay some obligations, including aircraft lease payments, and as surging debt drove up the cost of the group's short-term fundraising to new highs.

Mr Chen, speaking at his office in Haikou, southern China, where HNA Group has its headquarters, said he was not involved in decision making for any transactions and declined to comment on fundraising plans.

After years of "extraordinary development", Mr Chen said that HNA was now focused more on integrating operations, creating synergies between resources at home and overseas, and improving group management.

"Our business has become so big that we need to improve efficiency," said Mr Chen. "The long-term goal remains unchanged, which is to become a world-class enterprise," he added. "2018 is our year of effectiveness."

HNA's leverage has alarmed some analysts and its "aggressive financing policy" caused S&P Global Ratings in November to downgrade its assessment of the company's credit-worthiness. In December, HNA said it received pledges of support for 2018 from eight big domestic policy and commercial banks, including China Development Bank, Export and Import Bank of China, and Industrial and Commercial Bank of China.

The company also said it still had 310 billion yuan (S$64 billion) in unused credit facilities from financial institutions.

Mr Chen said financial institutions continued to support HNA because of the quality of its assets and projects. "We provide local employment, tax revenue and development," he added.

As challenges multiplied, Mr Chen said it was unreasonable to expect HNA to "fully grasp" the situation at once. Digesting the group's acquisitions and integrating operations would "take some time", he said. "So we're doing it piece by piece."

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 19, 2018, with the headline 'We can manage cash crunch, says HNA chairman'. Print Edition | Subscribe