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China’s HNA Group Selling $2B Hong Kong Properties To Cut Debt Burden

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China’s embattled  HNA Group is again selling assets to pay down its debt burden. In a statement to the Hong Kong stock exchange Tuesday, HNA unit Hong Kong International Construction Investment Management Group Co Ltd said  it will sell two Hong Kong properties to Henderson Land Development Co Ltd for HK$16 billion (US$2 billion).

Sale of the two pieces of land in Hong Kong’s Kai Tak district, formerly home to Hong Kong’s international airport, is expected to be completed on February 14, according to the disclosure. HNA reportedly acquired the land, through a subsidiary, in 2016 for HK$14.2 billion.

HNA, whose holdings range from airlines to hotels and financial services, has recently been shedding assets to regain financial stability following a two-year, US$50 billion acquisition spree. Along with other major Chinese companies burdened with excessive debt, such as Dalian Wanda and Anbang Insurance, HNA has faced government criticism and increased scrutiny from analysts.

In January, HNA reportedly told creditors that it is facing a liquidity shortage of at least RMB15 billion (US$2.4 billion) as it approached a deadline to repay debts. The company has around RMB65 billion (US$10 billion) in debt which is due in the first quarter.

The company reportedly told creditors that it aims to sell as much as US$15.8 billion in assets in the first half of the year. The group has already sold a building in Sydney, Australia, for US$168 million and is exploring ways to sell its 29.5% stake in Spain’s NH Hotel Group, valued at around US$775 million.

As of last August, HNA spent RMB15.6 billion (US$2.4 billion) on interest, more than any other non-financial firm, listed or unlisted, in China. HNA’s credit rating was reduced last November to B, five levels below investment grade B+ by S&P, due to China’s tightening oversight and HNA’s rising funding costs.

The financial crisis facing HNA was so acute in January that CEO Adam Tan cancelled his plans to attend the Davos economic summit in Switzerland. Instead, Tan has reportedly issued a memo to all staff warning them that the company plans to cut costs “dramatically” and urged employees to cut down on unnecessary expenses.

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