HNA’s financial saga has once again taken a strange turn. Amidst dealing with its substantial debt obligations, the company is once again failing to meet the most basic financial obligations for the core of its business, air travel. The company reportedly owes a state-run aviation fuel company $476 million. This follows news that broke in December that HNA was failing to make payments on leased aircraft. HNA owns several airlines, including Hainan Airlines.
HNA has been unable to pay off a $476 million bill to a state-run aviation fuel company
A company, even one as large as HNA Group, facing a liquidity crisis is not unprecedented. However, HNA has during this period repeatedly made high-profile announcements regarding investments and expansion efforts, all while being unable to fund its day to day operations. The most recent announcement was the launching of two funds that will invest $3.2 billion for Belt and Road Initiative (BRI) projects.
A subsidiary, HNA Capital Group Co., will manage the new funds and will attempt to court investors from ASEAN nations. It’s unclear how much of the capital will be provided by HNA and its various subsidiaries. However given the conglomerate’s ongoing financial woes, it seems unlikely that foreign firms or investors would be willing to trust a company that seems wholly unable to manage its finances.
It seems unlikely that a company seemingly incapable of managing its own finances will garner trust from potential investors for the new BRI fund
The company also announced it would be investing $7.5 billion in a new smartphone application called HiApp for travelers who utilize the company’s hospitality offerings. The company has provided some details about the application, but it still isn’t entirely clear what the software will do.
It’s possible that these high-profile efforts are a means of reassuring investors, analysts, and state bodies that the health of the company is strong. The alignment of HNA with BRI, which has quickly become the Chinese government’s flagship foreign policy effort in Eurasia, could be a means of communicating the usefulness of HNA as a potential partner for the state.
Regardless, the group’s financial efforts illustrate that the company is in dire straits and there doesn’t seem to be a clear path to recovery, although the company has been offloading many of its properties.
HNA has even resorted to asking its employees to loan the company money, with promises of a high rate of return
The group’s recent attempts have included the sale of extremely high yield bonds, with yield rates in excess of 8 percent over the course of a single year. HNA Group even emailed its own employees asking for high-interest loans. The company called these loans an “employee treasure” investment product and said they would garner a return of 8.5 percent with purchases of $1,500. Some pitches even promised employees returns as high as 40 percent for purchases of $15,000. These efforts are a clear sign that company has been largely cut-out of financing through banks.
Additionally, the conglomerate is planning on cutting 100,000 jobs, a quarter of its workforce.
HNA’s meteoric rise to global prominence was facilitated by high-profile purchases and acquisitions around the world totaling an estimated $40 billion, largely financed through debt.