China's HNA bosses buy dollar bonds after S&P credit cut

China's HNA bosses buy dollar bonds after S&P credit cut
* HNA says staff bought bonds backed by the group

* Amount of bonds purchased not clear

* HNA says group in a very healthy financial position

* S&P lowers HNA credit profile on deteriorating liquidity (Adds HNA comment in the last paragraph)

By Sumeet Chatterjee

HONG KONG, Feb 14 (Reuters) - Some HNA Group board directors and senior managers have bought offshore dollar bonds guaranteed by the Chinese conglomerate in the latest effort to shore up its finances.

The aviation-to-financial group did not name the buyers or the value of the bonds purchased and declined to provide any additional information when contacted by Reuters.

S&P Global Ratings has downgraded the credit profile of HNA Group and two of its units, citing a "deteriorating liquidity profile" as it faces mounting debt maturities this year.

After announcing $50 billion of deals over two years, HNA was, like other Chinese firms, hit by increased scrutiny of its finances as Beijing grew wary of its acquisition spree.

Hainan-based HNA has since said it would sell some of its assets, and this week announced a $2 billion deal for two Hong Kong land parcels. Sources have said it is in talks with creditors about its outstanding loans.

In a statement on Wednesday, HNA said it was in a "very healthy financial position" with total assets of 1.5 trillion yuan ($236 billion) at end-2017, and that its staff purchased the bonds due to "full confidence" in its business prospects.

In the last couple of years, HNA and its units have issued bonds, both in China and overseas, to finance some acquisitions as well as to refinance some of its maturing debt.

Hainan Airlines Holdings, the group's flagship firm, has bonds issued worth $4.8 billion, denominated in both Chinese yuan and U.S. dollars, according to Thomson Reuters data. About $1.5 billion will mature in 2018.

HNA Group itself has about $16 billion worth of bonds outstanding, of which $2.4 billion will come up for repayment this year and $4.8 billion in 2019, the data showed. A $52-million tranche, issued offshore, will be due on July 18.

In November, the group sold a short-dated bond at a coupon of 9 percent, higher than the 8 percent yield indicated on its December 2018 bond, underlining the pressure to refinance its debt-laden balance sheet.

The yield on a group unit's three-year, December 2018 bond has nearly tripled from a year-ago, underscoring investor concerns and raising future borrowing costs.

In December, senior executives of HNA agreed to purchase $13 million worth of shares in another group subsidiary Bohai Capital Holdings to bolster "investor confidence" and promote stability.

Bohai is one of many HNA listed units that have suspended trading in their shares, pending announcements.


Rating agency S&P cut HNA's credit profile by one notch to 'ccc+', a "speculative grade", on Tuesday.

"While it appears to have made some progress, and has valuable assets and highly liquid stakes in public traded companies, in our view HNA Group is dependent upon favourable market conditions to meet its upcoming financial commitments," S&P said in its report on the group as well as some units

S&P also lowered the credit rating of HNA's IT outsourcing unit Pactera and airline caterer Gategroup Holding, as a result of the downgrading of the parent's credit profile.

It said it expects Pactera's debt leverage to remain high and its cash inflows to fall short of its outflows over the next 12 months. The company would need to raise new funds to meet its upcoming debt obligations, S&P said.

HNA Group declined to comment on S&P's move. ($1 = 6.3530 Chinese yuan) (Reporting by Sumeet Chatterjee; additional reporting by Matthew Miller in Beijing and Kane Wu in Hong Kong; Editing by Edwina Gibbs/Simon Cameron-Moore/Alexander Smith)

First Published: 2018-02-14 04:29:44
Updated 2018-02-14 13:52:59

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