The Real Deal New York

HNA launching $1.5B cross-border investment fund

Investment vehicle would move acquisitions off balance sheet and away from watchful gaze of Chinese regulators
April 25, 2018 02:05PM

HNA’s Chen Feng

Chinese conglomerate HNA Group is looking to raise as much as $1.5 billion for an offshore investment fund as a way to keep doing deals as regulators back home put a lid on overseas transactions.

The Overseas Aviation and Tourism Industry Fund will be HNA’s main vehicle to invest in travel, aviation and real estate assets across the globe, Reuters reported.

HNA started raising external capital earlier this month for the fund, which will be run by its aviation and tourism department as the general partner. A group-related limited partner has made an initial commitment of somewhere between $100 million and $150 million, documents reviewed by Reuters show.

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HNA says in documents that its competitive advantage is a guaranteed minimum return of 8 to 10 percent. The company is looking for other limited partners to invest at various stages.

The fundraising push is an indication that HNA is looking for a way to do more deals office its own balance sheet and reduce its risk profile as Chinese regulators look to rein in debt-laden companies like HNA.

“This is in response to the Chinese government’s prohibition of future investments and concerns that their debt levels are untenable,” said Frank Turner, co-chair of the Asian Pacific practice at the law firm Osler. “They’re trying to protect their balance sheet.”

Here in New York, HNA has been looking to sell of major properties like 245 Park Avenue. The company recently sold its office tower 1180 Sixth Avenue for $305 million and is also looking to sell some or all of its 26 percent stake in Hilton Worldwide, which it bought in 2016 for $6.5 billion. [Reuters]Rich Bockmann