HNA to offer most expensive China bond

The company is marketing a 363-day bond at 9%, according to a source. The previous record was Herun Holdings Ltd

HONG KONG: HNA Group Co, which once symbolised China’s insatiable appetite for assets, is offering to sell the country’s most expensive short-term dollar bond ever as it struggles to control its soaring financing costs ahead of a wall of maturing debt.

The company is marketing a 363-day bond at 9%, according to a source. The previous record was Herun Holdings Ltd’s 8% notes sold in September, according to data compiled by Bloomberg.

The sale is the latest indication that HNA’s US$40bil-plus acquisition spree since last year, where it became the largest shareholder in companies such as Deutsche Bank AG and Hilton Worldwide Holdings Inc, is catching up to the company as it accumulated about US$28bil in short-term debt.

HNA saw its interest expenses more than double during the first half, when it paid more than any other non-financial company outside of the US and Brazil, according to data compiled by Bloomberg.

“Nine per cent is really high for one year,” said Warut Promboon, managing partner at credit research firm Bondcritic. “Basically, it tells you that the worry is real.”

The yield on its US$473mil 8.125% notes due 2018 rose 33 basis points, the biggest increase since Sept 14.

Bonds due in a year or less do not need government approvals. A representative of HNA couldn’t immediately comment.

HNA was among conglomerates that spearheaded the record US$246bil in outbound acquisitions announced by Chinese companies last year, according to data compiled by Bloomberg. Then the government began restricting capital outflows to protect the yuan from depreciating further.

Now, costs are piling up. HNA’s interest expenses more than doubled to a record 15.6 billion yuan as of the end of June, exceeding the company’s earnings before interest and taxes. — Bloomberg