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HNA begins buying back their own debt

Investors worry as the conglomerate's yields on recently-issued bonds spike

(Credit: back image of 1942-43 archival Office for Emergency Management War Production Board advertisement, sourced from National Archives and Records Administration; left photo by World Travel & Tourism Council/Flickr)
(Credit: back image of 1942-43 archival Office for Emergency Management War Production Board advertisement, sourced from National Archives and Records Administration; left photo by World Travel & Tourism Council/Flickr)

Amid rising investor concerns and climbing yields, HNA Group has begun buying back bonds.

Though the Chinese conglomerate insists in a statement that its “finances are stronger than ever,” the Wall Street Journal reported HNA was trying to assuage persistent worries on a Friday conference call with investors.

Over the past weeks, yields on HNA subsidiaries’ bonds have grown while their credit rating was downgraded due to increasing risks, the Journal reports. Thomson Reuters pegged one of HNA’s bonds, issued in November, as providing a yield of more than 20 percent on Thursday; the yield was estimated at about 12 percent Friday afternoon. HNA’s holdings span industries and borders with fingers in multiple honeypots including Manhattan real estate; HNA shelled out $2.21 billion for 245 Park Avenue earlier this year, as The Real Deal first reported, among numerous other global investment buys.

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However, after investing about $45 billion in foreign holdings over the past three years, HNA is facing increasing pressure from the Chinese government to limit the outflow of capital from China (part of wider crackdown on Chinese nationals’ foreign investment), as well as more than $100 billion in debt. The combination of the two is making investors nervous and prompted HNA to consider selling its international assets last month.

Now, as HNA looks ahead, about 25 percent of its debt which needs refinancing in 2018 and options appear scarce; issuing bonds that take more than a year to mature requires the Chinese government’s approval — known to be difficult to obtain — so HNA is considering all bonds for repurchase and has been recently started issuing short-term bonds — for which the company is agreeing to pay interest rates of over 8 percent, according to the Journal.

The conglomerate told investors they would disclose if buy-backs totaled more than 5 percent of outstanding bonds and, in their Friday statement, emphasized their “cooperative relationships” with overseas banks. [WSJ] — Erin Hudson

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