China’s HNA Group has said it is walking a fine line between life and death, as internal conflicts at the heavily indebted conglomerate burst into the public sphere.
In a letter published online on Thursday, the airline-to-insurance business criticised its own finance department for its handling of an investor meeting that prompted a suspension of trading in HNA’s debt.
The statement underlined the conglomerate’s growing credit problems — which have been compounded by coronavirus — and factional rifts that have hurt its operations since the sudden death of a top executive two years ago.
The letter, posted from one of the company’s verified Chinese social media accounts, said HNA had raised “harsh criticism” of the head of finance and other related executives, without naming individuals. The letter is unsigned.
It was unclear why the internal conflict had been made public. But the statement from the company — that just three years ago was China’s largest buyer of overseas assets — suggested friction between its recently appointed executive chairman, Gu Gang, and HNA’s finance department.
A senior Chinese government executive, Mr Gu joined the company in February to manage severe liquidity risks at HNA as a result of the coronavirus crisis. HNA’s businesses include Hainan Airlines, which has been hit by restrictions on air travel due to the pandemic.
“The finance department has not followed the requests of the company to carry out smooth communication with its investors, doing its work hastily and without sincerity,” the HNA letter said.
“Gu Gang emphasised that HNA’s problems accumulated over time and it is indeed difficult to solve the problems overnight,” the letter read. The company said its cash flow issues had been worsened by the coronavirus outbreak. “This is a big test for all HNA employees. Now HNA has reached the point of life and death,” it added.
Late on Tuesday, HNA publicly apologised to its investors for organising a last-minute investor meeting the night before. There it announced it would delay by a year both principal and interest payments for a bond issued in 2013 that had been due on April 15.
The Shanghai stock exchange halted trading of a separate bond on Wednesday, citing “abnormal fluctuations”.
The recent statements from HNA have reignited concerns over its ability to pay its debts and conflicts between different company factions.
“HNA is currently facing many problems in both asset disposal and its daily operations,” said Shen Meng, director at Chanson & Co, a boutique investment bank in Beijing. “These huge operating pressures have led to a breakout of internal management chaos.”
At its peak in 2017, the company was made up of several sprawling, overlapping divisions. HNA in the preceding years had bought up more than $40bn in global assets, including large stakes in Hilton Worldwide and Deutsche Bank.
But after Wang Jian, group chief executive and master dealmaker, fell to his death while sightseeing in France in July 2018, several groups of top shareholders began vying for control over assets. One investor who sought to buy a large real estate portfolio from HNA in late 2018 said that the deal fell through because it was no longer clear who was in control of the assets.
Following the death of Mr Wang, a team from China Development Bank — one of HNA’s creditors — stepped in to unwind many of the company’s investments.
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