Ailing HNA applies for bankruptcy & restructuring

Hainan 787

China's HNA Group is set to be restructured over its failure to repay debt, further cementing the decline of the once high-flying conglomerate and Deutsche Bank investor that was seized by the state nearly a year ago. It will also support the court's efforts to protect the legitimate rights and interests of the creditors and ensure everyday operations of the company in the meantime.

HNA began life as an airline but grew rapidly through investments in real estate and finance, and overseas acquisitions, to become one of the most important players in China's private sector. In September of a year ago Chen Feng, dubbed the Buddhist billionaire for his traditional Chinese costumes, had been placed on a debtor list which banned him from flying or staying in luxury hotels after HNA had failed to make payment on a debt.

Deutsche Bank AG and Hilton Worldwide Holdings Inc., HNA was left with a total debt of about $86 billion by the end of 2017. Others include Anbang Insurance Group Co.

But those acquisitions were built on a lot of debt, which hit 707 billion yuan ($110 billion) by June 2019.

But that could be just the tip of the iceberg.

In April 2019 CWT International, a Hong Kong-listed subsidiary of HNA Group, revealed that creditors had seized its assets in Singapore, China and the U.S., after the company defaulted on a short-term loan.

Under China's bankruptcy law, companies that are insolvent and unable to repay debts can take as long as nine months for a bankruptcy restructuring.

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HNA confirmed it had received a formal application from the Hainan Provincial High People's Court to reorganise the company on the grounds it couldn't service its debt.

It said creditors asked "for bankruptcy and reorganization of our group because the group can not repay their debts".

Gu Gang, former executive chairman and board member of HNA, resigned from his current positions at HNA last Friday and was elected the Party secretary of HNA Group, according to a company statement.

HNA has controlling stakes in 18 listed companies. According to information released by HNA in July 2017, the company's two largest shareholders were charitable funds. It gave no details of the company's status and no indication whether the court agreed to the petition.

The move came after a local government-led working team concluded due diligence at HNA earlier in January, and laid out risk disposal plans, enabling it to move to the next stage of resolving a multi-year liquidity crisis.

The first batch of 62 companies is part of the 200 companies, taking up almost 60 percent of the group's total debts, the source said.

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