Chinese firm HNA's debt declines for first time, shrinks by about $8.3 bn

HNA Group’s debt, one of the highest among Chinese companies, declined for the first time after the embattled conglomerate reversed a multi-year acquisition spree by selling off dozens of assets to stay in business.

Total debt fell 9.5 per cent to 541.6 billion yuan ($79 billion) at the end of June, down about $8.3 billion from the record high set at the end of last year, according to figures derived from a half-year report dated Friday. Prior to this, HNA’s debt had always risen, based on public data stretching back to 2005.

The lighter debt load could ease the pressure on HNA, which has been seeking to recover from a debt binge that involved borrowing tens of billions of dollars to fund purchases ranging from big stakes in Deutsche Bank AG to skyscrapers in Manhattan. The company, along with Dalian Wanda Group Co. and Anbang Insurance Group Co., is now reversing course after spearheading an unprecedented shopping spree of high-profile assets worldwide, which ultimately drew the ire of the Chinese government amid concerns about unsustainable debt levels.

HNA has sold more than $17 billion in assets this year — much of which came from the sale of its holdings in Hilton Worldwide Holdings  and its spinoffs — according to a Bloomberg tally. More disposals are on the way after the company agreed to unload billions of dollars worth of shares in Avolon Holdings Ltd. and the Radisson hotel chain. HNA is also seeking to sell buildings across America, London and China, people familiar with the matter have said.

The improved finances come after China’s top leaders were said to have agreed in June for the government to help HNA raise funds as long as the company sells out of non-core industries, stops diversifying through acquisitions and sticks to its main travel business.

Yet challenges abound. HNA is still burdened with one of the largest interest expenses in the world. The payments, which it reduced by 7.4 per cent from a record set the previous semester, ranked as the highest among non-financial companies in Asia, according to data compiled by Bloomberg as of Saturday. HNA also ranked No 1 in Asia last year.

Its cash, equivalents and short-term investments dropped to 128.1 billion yuan, not enough to cover HNA’s short-term debt. The total debt figure also remained as one of the biggest for a non-financial company in Asia and was more than triple that of fellow Chinese conglomerate Fosun International.

@2018Bloomberg