HONG KONG: For HNA Group Co leader Chen Feng, the sudden death of his No. 2 raises the pressure for the Chinese tycoon to step up his involvement in fixing the finances of a group saddled with more than US$90bil in debt.
The late Wang Jian, the junior of HNA’s two chairmen, died while sightseeing in a French village this week at a time the group was undertaking an urgent restructuring that’s already involved more than US$16bil in asset sales this year. That leaves remaining managers, particularly Chen, to split the challenge of navigating one of China’s most indebted companies toward the path of normalcy.
“Chen Feng has been retiring himself from day-to-day management over the years and a lot of the responsibilities have been concentrated around Wang Jian,” said Yu Zhanfu, Beijing-based partner at Roland Berger Strategy Consultants.
“Chen Feng is now crucial in helping stabilise sentiment in the company. He will also be the most important person to relay key messages to the outside world about HNA going forward and he needs to be more proactive.”
There is no shortage of challenges Chen, 65, and his managers including chief executive officer Adam Tan, 51, face as they seek to overcome the group’s liquidity challenges. After spending tens of billions of dollars snapping up trophy assets worldwide – including large stakes in Deutsche Bank AG and Hilton Worldwide Holdings Inc – HNA is now in downsizing mode.
Despite its success in selling out of Hilton and disposing of various real estate properties globally, the job isn’t done, according to Warut Promboon, managing partner at Bondcritic Ltd.
“HNA should come out to affirm to investors that the restructuring and asset sale efforts are on course,” said Promboon. HNA needed to reduce its debt further by billions of dollars, Promboon said.
Still, concerns over HNA have been easing in recent weeks after the asset sales and as the Chinese government is said to have agreed to help the company, which couldn’t generate enough profit in 2017 to pay interest expenses.
HNA last month sold its first bond in China after a rare five-month drought, signalling a crucial source of funding for the debt-laden conglomerate may be opening up. Still, the issuing company, Bohai Capital Holding Co, paid a record coupon of 7%, according to data compiled by Bloomberg.
Borrowing costs for HNA have been high – they surged to a record 32.1 billion yuan in 2017, exceeding its earnings and topping all non-financial companies in Asia. — Bloomberg
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