HNA group headquarters in Beijing.li he/vcg/getty images (Getty) «There is no greater disaster than greed,» says Lao-Tse. The eastern wise, whose doubtful existence dates back to the fourth century BC, could well have referred to HNA Group. This conglomerate, in its day one of the most prosperous in China, now borders bankruptcy, unable to deal with a debt of more than 700,000 million yuan (90,000 million euros) consequence of its ambitious global expansion during the last decade that led him to possess significant percentages in giants such as Deutsche Bank or Hilton. An onslaught that retired without further fruits, which have revealed a plot of bad practices within the group. HNA splendor belongs to another time. A brief stage in which, since 2010, the great societies of the Asian giant ventured away from their borders willing to increase their financial scope, offensive properly based on debt that would soon become suffocating. This is the case, for example, of Anbang, CEFC or Dalian Wanda. The latter would buy and then sell – among many other things – a part of Atlético de Madrid, as attesting to the patronymic that still accompanies the metropolitan. HNA also set foot in Spain, with a 26% participation in the NH hotel chain, which would later pass to the Thai group minor in exchange for 424 million euros. The list of international companies in which it landed includes famous names such as Radisson, Virgin Australia, Tap Air Portugal and Ingram Micro – the greater acquisition of an American technology company by a Chinese actor. But with 2017 the replication arrived. The Chinese government, alarmed at increasing indebtedness, forced the brake to step on. In July of this year, HNA held the 170º position of the Fortune list, which includes the 500 largest companies in the world, with revenues worth 53,000 million dollars (44,000 million euros) and assets for 1.2 billion yuan (150,000 million euros) distributed in more than 2,300 companies. The conglomerate had touched the roof. From then on, he began paying for his calculation errors. According to the latest published financial report, which covered the first half of 2019, the group had contracted a debt of 706,000 million yuan (91,000 million euros), which raised its indebtedness ratio to the worrying level of 72.06%. Currently, HNA owes $ 27.5 billion (23,000 million euros) in slope bonds and another 20,000 million (16.7 billion euros) on loans, according to data compiled by the Alalogic analysis firm. The situation could even be even more hurried, since it would have also resorted to other financial tools, such as the issuance of short -term obligations, which hinder an exhaustive evaluation of their accounts. HNA creditors have already requested the opening of the creditors’ contest, as recognized by the entity itself through a statement issued last week after receiving the notification of a court of Hainan, province in which settled. According to Chinese regulation, every insolvent company has a period of up to nine months to reach an agreement with the plaintiffs. In the document, the group promised to follow the instructions of the authorities and advance in the restructuring of their debt to «protect the legal rights of their creditors» and «ensure the functioning of their activity.» The circumstances have also played against HNA. The conglomerate chose the worst time to abandon the diversification that constituted the root of its problems and return to its origins. The HNA seed is in Hainan Airlines, the fourth largest airline in Asia – the three precedents are also Chinese – and has 13 more. This industry, however, has been reduced to minimums as a result of the outbreak of the pandemic and it is estimated that it will take years to recover previous levels. The Provincial Government of Hainan went to his aid in February last year, launching a work team aimed at ensuring the survival of the firm. His first measure was to discuss a debt restructuring plan, which could include payment in shares to creditors – the first of them is the State Chinese Bank Development Bank – as well as the intervention of new strategic investors. As leaked to local media, its purpose was to liquidate assets until stable growth and satisfy all its obligations within five and eight years. This operation could assume that the main shareholders see their power reduced. According to the data offered by HNA in July 2017, two beneficial organizations are distributed most of its titles. Hainan Cihang Charity Foundation, based in the United States, has 29.5%; while a second foundation of similar name and base in Hainan controls another 22.75%. The first individual shareholders are the co -founders of the group, the late Wang Jian – who died in 2018 as a result of an accident in France – and Chen Feng, with 14.98% each.
Intervention
The latter was the head of the company, but the intervention of the authorities has ended up demolishing him. Last week, HNA reported a renewal process in its dome, through which Chen was set out from the party’s committee in the group, an organ with powers equivalent to that of the Board of Directors. His replacement was Gu Gang, who leads the government work team, which has aroused the rumor that the administration would have taken control of the conglomerate. Shortly after his appointment, GU sent a letter to the employees – to which the Reuters agency had access – in which he affirmed that “only through bankruptcy and restructuring we can be reborn.” The government’s control has also contributed to uncover bad practices. Three HNA units – Airlines Holding, HNA Infrastructure Investment Group and CCOOP – have revealed last week that up to 61.5 billion yuan (7.9 billion euros) would have been embedded by their shareholders. The identities of the guilty have not yet been revealed, but the authorities are expected to undertake legal measures. When the scandal uncovered, the actions of the three companies fell almost 10% in the Shanghai and Shenzhen bags, the maximum daily allowed. HNA faces an end as dramatic as its beginning was: the popular heritage, however old, is not usually wrong.
