HNA Group seeks $6.5 bln Hilton sale amid debt concerns

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In a filing to US securities authorities on Thursday, troubled Chinese conglomerate HNA Group confirmed it is looking to sell all or part of its 6.5-billion-US-dollar stake in hotel chain Hilton Worldwide.

The Hilton deal in 2016 was arguably the flagship acquisition of a 40-billion-US-dollar overseas shopping spree that saw HNA buy major stakes in Swissport, Deutsche Bank and some of New York’s most expensive property.

The shopping spree came to an abrupt halt in 2017 when HNA Group saw its internal finances come under pressure from authorities. It emerged that many of its overseas mergers and acquisitions (M&A) were financed with leveraged capital.

VCG Photo

In January, Swiss authorities announced they were investigating HNA Group’s takeover of airline catering company Gategroup, amid evidence that HNA had provided “untrue or incomplete” information before finalizing the 1.5-billion-US-dollar deal.

This year has seen HNA look to sell off billions of dollars’ worth of foreign property, including its New York skyscraper on Park Avenue, which is worth some 2.1 billion US dollars.

Earlier in March the conglomerate sold off its 25 percent stake in Park Hotels and Resorts and Hilton Grand Vacations – part of the wider Hilton Worldwide group.

Shares of the Hilton Worldwide jumped by one percent after news of HNA's intention to sell, with investors confident that the global hotel chain will be better off away from the Chinese conglomerate.

This year and the next will see bonds worth 20 billion US dollars expire. A filing by HNA Group to China’s bond market authority showed that in the first 11 months of 2017, the group’s debt in bonds and bank loans surged by one third to 637.5 billion yuan (101.1 billion US dollars).

Talking to Xinhua earlier this year, HNA co-founder and chairman Chen Feng admitted the company was facing liquidity problems, but was optimistic the conglomerate could overcome the problem and continue to get support from banks and other financial institutions.

Chairman of HNA Group Chen Feng, September 2015. /VCG Photo

Several other major Chinese conglomerates are also selling off overseas assets amid growing pressure on their finances.

Once China’s richest man, Wang Jianlin led his company Dalian Wanda Group through a series of overseas M&As, spending billions of US dollars in the process.

However, since 2017 Wanda has sold off many of those assets, with Wang promising that Wanda would focus on clearing “all overseas debt” in January this year.

Last year the group sold off 9.4 billion US dollars’ worth of hotel and entertainment complexes, as S&P downgraded the company to junk status, with loan repayments worth some 2.1 billion US dollars due this year.