HNA seeks investors for Hong Kong property

HNA is seeking minimum commitments of RM3.9m per investor

By BLOOMBERG

HONG KONG • HNA Group Co, one of the world’s most indebted companies, is taking the rare step of inviting outside investors to buy into two Hong Kong plots it purchased for US$1.8 billion (RM7.04 billion) just over a year ago, as the Chinese conglomerate struggles to secure traditional means of financing.

HNA is seeking minimum commitments of US$1 million per investor for a fund whose underlying assets will consist of the plots, according to a marketing document seen by Bloomberg. The fund has two investment classes: The first has a two-year term with annual returns of 9% plus 5% of any profits from the project in the second year, while the second has a four-year term offering 40% of profits to investors in the final year, according to the document dated on Tuesday.

The document didn’t say how much HNA is seeking to raise in total but any funds would help ease HNA’s mounting financial pressure after the group spent tens of billions dollars on a debt-fuelled acquisition spree that resulted in HNA becoming the largest shareholder in companies such as Deutsche Bank AG and Hilton Worldwide Holdings Inc. In Hong Kong, HNA has been forced to push back payments of loans it took out to finance the project, located in vicinity of the former Kai Tak airport and where residential apartments are scheduled to go on sale in the third quarter of 2019.

HNA has bought four plots of land in Kai Tak for a combined US$3.5 billion. The two sites it is now seeking investors for were bought in quick succession in the final months of 2016, and were among the most hotly contested that year, with HNA beating some of Hong Kong’s biggest developers to win the bids.

It’s unusual for developers in Hong Kong to raise funds for projects through outside investors because they can easily borrow money from banks at low rates, according to Patrick Wong, a real estate analyst at Bloomberg Intelligence.

The Chinese conglomerate has two other loans related to Kai Tak coming due in February and June, people familiar with the matter said earlier.

Separately, some HNA units missed payments due to several Chinese banks in recent weeks, prompting three lenders to freeze some of the borrowers’ unused credit lines, people with knowledge of the matter have said.

HNA faces rising bond maturities later this year even if it’s able to navigate current difficulties in repaying debt to banks.

The bill on maturing offshore and onshore notes for the group and its units will swell to more than 12 billion yuan (RM7.32 billion) in both the third and fourth quarters, from one billion yuan this quarter, Bloomberg-compiled data show.

This debt wall is all the more problematic because the yields on some of its bonds have surged to about 20%, the highest since they were sold.