HONG KONG: The short-term debts of HNA Group’s main offshore fund-raising arm are close to outstripping its ability to meet them, according to figures provided in documents for the acquisitive Chinese conglomerate’s most recent bond deal, where the unit paid almost 9 per cent for a one-year loan.
The documents contain figures for the first nine months of 2017, and show that the cash and current assets of HNA Group International Company Limited (HNAI) cover its current liabilities — debts and payments due within a year — with just 8 per cent headroom, down from 26 per cent at the end of 2016.
Current assets include items such as the privately-held group’s inventory and money owed to it. The so-called current, or working capital, ratio — current assets divided by current liabilities — is a common analyst gauge of a company’s liquidity.
HNA Group declined to comment. HNA Group’s $50 billion worth of deal-making in the past two years has triggered close examination of its sprawling structure and opaque ownership — and of its use of debt to fund an acquisition spree that has included a stake of almost 10 per cent in Deutsche Bank as well as a one-quarter holding in Hilton Hotels.
It also plans to take a majority stake in SkyBridge Holdings, the US hedge fund founded by Anthony Scaramucci, US President Donald Trump’s one-time communications director.
HNA Group typically raises debt through its acquisitions — funding its aircraft-leasing business with bonds issued by that group, for example — which makes it hard to gauge the overall financial health of the group.
HNAI acts as the group’s offshore investment and foreign capital management platform and holds almost $12 billion of group assets, according to the documents. On Thursday it announced the purchase in Australia of Automotive Holdings’ refrigerated logistics business, for 400 million Australian dollars ($304.52 million).
However the numbers presented by HNAI in its bond filing show signs of stress. Finance costs rose 50 per cent in the first nine months of 2017 from a year ago, according to the document, which showed it has paid HK$1.32 billion ($168.99 million) so far this year. The company’s cash balances fell sharply to HK$1.16 billion from HK$8.57 billion.
This month, HNAI accepted a coupon of 8.875 per cent on a $300 million one-year bond — a rate one investor advisor described as “scary high”.
— Reuters
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