HONG KONG / SHANGHAI (Reuters) – Shares of listed companies linked to China’s HNA Group plummeted on Monday after the struggling conglomerate reported that its creditors had filed for bankruptcy and that nearly $ 10 billion had been embezzled by its shareholders. three units.
The decision to file for bankruptcy came after the group underwent a restructuring exercise led by the Hainan government to resolve its liquidity risks stemming from years of aggressive acquisitions abroad.
HNA, whose main business is Hainan Airlines, used a $ 50 billion wave of global acquisitions, mostly fueled by debt, to build an empire with business interests from Deutsche Bank to Hilton Worldwide.
As of Monday morning, HNA-related stocks, including Hainan Airlines Holding, HNA Innovation, CCOOP Group, HNA Technology and Bohai Leasing fell between 5% and 10%.
HNA, which was once one of the most ambitious companies in China, said on Friday night that its creditors had filed with the Hainan court for the company to go bankrupt and restructure.
Hainan Airlines, HNA Infrastructure and CCOOP announced on Saturday that a total of $ 9.6 billion was diverted by shareholders and other related parties. He gave no further details on who the shareholders were.
“Fundamentally, a bigger, but very old story at stake – if you expand your business by borrowing money … you better have money to pay for it all,” said Fraser Howie, an independent commentator and author of books on the financial system from China. .
Looking at the past history of China’s acquisitive conglomerates, he said: “Each of them has been dismembered, dismantled and restricted to varying degrees. This type of company is gone and will not return. “
Beijing has put more pressure in recent years on opaque corporate structures, excess debt and businesses it considers excessively aggressive, in trying to control capital outflows and keep its economy stable.
Although the scope of HNA’s restructuring was not immediately clear, some bankers do not expect a commercial sale process to be launched for their main businesses, including Hainan Airlines, which they said would likely be merged with a state-owned airline.
HNA started selling many of its trophy assets three years ago to focus on its airlines and tour companies, after its massive spending has attracted scrutiny from China’s central government and other foreign regulators.
In recent years, it has sold assets such as airport services company Swissport and electronics distributor Ingram Micro. The COVID-19 pandemic, however, put pressure on the civil aviation sector and worsened its liquidity problems.
Reporting by Brenda Goh in Shanghai and Kane Wu in Hong Kong, additional reporting by Luoyan Liu; Written by Sumeet Chatteree; Editing by Rashmi Aich and Richard Pullin