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Hainan Airlines plans to raise US$7.9 billion via a stock sale to slash debt
- Most new stock will be gifted to creditors of the carrier
- Share issue latest step in efforts to restructure HNA assets
Hainan Airlines Holding plans to sell new shares to raise around US$7.9 billion , the majority of which will be used to reduce financial obligations as the struggling carrier inches ahead with its restructuring plan.
The aviation unit of China’s debt-laden conglomerate HNA Group expects to issue 16.4 billion new shares, of which 4.4 billion will be sold to strategic investors for 2.8 yuan apiece, according to an exchange filing Tuesday. The remaining 12 billion shares will be gifted to creditors at 3.18 yuan each to help eliminate debt.
The stock issue is the latest step in China’s efforts to unravel HNA’s US$309 billion of debt after the group’s rapid borrowing-fueled expansion.
Founded by flamboyant businessman Chen Feng, HNA spent more than US$40 billion in the early 2010s acquiring luxury properties and major stakes in firms from Deutsche Bank AG to Hilton Worldwide Holdings. Those assets were then offloaded in an aggressive deleveraging campaign after China tightened credit lines to curb capital outflows.
HNA’s effort to refocus on its core aviation business has suffered a blow with Covid-19. The pandemic triggered a de-facto state takeover with the government of Hainan -- where HNA is based -- sending officials to take charge of the company’s management and embark on a restructuring process. The reorganisation plan was approved by a Chinese court in late October.
The restructuring also saw HNA bring in strategic investors, including Liaoning Fangda Group Industrial for the airline business and Hainan Development Holdings for the airport unit. The group and 320 related units will become six operations, under airlines, airports, ship manufacturing, hotel, financial services and others. Those units will be held by a parent company that will be managed via a trust with creditors as beneficiaries.
Hainan Airlines reported a third-quarter net loss of 2.56 billion yuan (US$402 million) in October, narrower than a 3.8 billion yuan shortfall the same period a year earlier. Revenue rose 10 per cent.
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