HNA Group Co. agreed to sell two plots of land in Hong Kong to the city’s second-richest man for HK$16 billion ($2 billion) as the cash-strapped Chinese conglomerate accelerates asset disposals to repay its mounting debt.
The sites, purchased just over a year ago, were sold to billionaire Lee Shau Kee’s Henderson Land Development Co., according to a statement on Tuesday. HNA had spent about HK$14.2 billion on the two sites, according to records from Hong Kong’s land registry.
The disposal may help ease the financial strain HNA has been under after spending tens of billions of dollars on debt-fueled acquisitions to snap up assets including big stakes in Deutsche Bank AG and Hilton Worldwide Holdings Inc. The group has told creditors it could have a liquidity shortfall of at least $2.4 billion in the first quarter and that HNA is targeting about 100 billion yuan in asset sales during the first half, people familiar with the situation have said.
HNA bought four plots at the former Kai Tak airport for a total HK$27.2 billion between November 2016 and March last year, outbidding local developers for sites that were among the most hotly contested during that period. The sale to Henderson is expected to close February 14, according to the statement.
Separately, HNA has held preliminary talks with investors including Brookfield Asset Management Inc. about selling a pair of office buildings in London’s Canary Wharf district, according to people with knowledge of the matter. In the US, the Chinese conglomerate is selling properties valued at about $4 billion — including the 245 Park Ave. skyscraper it bought less than a year ago for one of the highest prices ever paid for a building in New York. In late January, HNA agreed to sell a Sydney office building to Blackstone for $161 million.
Still, HNA, which doesn’t earn enough profits to cover its interest payments, has been facing increasing skepticism from bond investors whether asset sales and lender lifelines will be enough to help the conglomerate roll over borrowings.
The yield on HNA’s yuan-denominated bond due in 2019 has almost doubled this year to 14.2 percent, according to exchange data. That’s about three times higher than the average yield on other notes with similar AAA local ratings, and twice that on securities with credit scores considered junk in China.
“With investor risk appetites more subdued in the wake of rising rates and widening credit spreads, it is difficult to envision HNA and its subsidiaries being able to tap either the onshore or offshore bond markets over the near future,” said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd.
HNA, one of the most prolific Chinese buyers of foreign assets until the government started frowning on capital outflows, isn’t alone in feeling the heat. Blackstone Group LP has held initial discussions about bidding for Anbang Insurance Group Co. assets — including New York’s Waldorf Astoria hotel — in a sale overseen by the Chinese government, people with knowledge of the matter have said.
Elsewhere, billionaire Wang Jianlin, whose group controls AMC Entertainment Holdings Inc. and was once China’s richest man, is retreating from previous ambitions to build an entertainment empire that could challenge Walt Disney Co.