Chinese conglomerate HNA Group faces bankruptcy, restructuring

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HNA Group, China's largest private aviation conglomerate, is facing bankruptcy and restructuring

Embattled Chinese conglomerate HNA Group, which has been struggling to resolve a drawn-out cash crisis, announced Friday it faces bankruptcy, in one of the biggest corporate downfalls in the country's history.

The group, which owns one of China's biggest airlines -- Hainan Airlines -- and is China's largest private aviation conglomerate, said in a statement that its creditors had applied to a court for the group's bankruptcy and reorganisation as it could not pay off due debts.

Once an aggressive dealmaker, HNA previously held stakes in the Hilton hotel group and Deutsche Bank, and made investments spanning the aviation, tourism, real estate and financial services sectors as part of an acquisition binge.

In 2017, the Chinese government cracked down on HNA's aggressive global expansion, forcing it to slim down its assets to focus on its airline and tourism businesses.

Weighed down by billions of dollars of debt, the struggling conglomerate has since been trying to dispose of its assets.

- Reorganisation, not liquidation -

"There were rumours (of bankruptcy) as early as the end of last year, but it hasn't happened until now," David Yu, finance professor at New York University Shanghai, told AFP.

"It's deemed to be a reorganisation rather than a liquidation, which means this is the beginning of many proceedings to follow… courts are deeming HNA to be rehabilitable."

Established in 1993, the company grew from a small regional airline based on China's tropical Hainan island to a huge conglomerate, which at one point employed hundreds of thousands worldwide and had assets worth at least 1 trillion yuan ($154.8 billion).

But the group has now offloaded many of those, including US tech distributor Ingram Micro Inc, and luggage handler Swissport.

The group still has stakes in several Chinese and international airlines, an industry decimated by the pandemic -- for example, it owns Hong Kong Airlines, which laid off hundreds of staff last year amid a steep drop in tourism.

HNA is also subject to multiple lawsuits from investors and clients to whom it is indebted, including consultancy firm Deloitte.

- Government tightening grip -

Its painful restructuring was sped up after the Hainan government formed a working group to handle company risks last February -- which observers viewed effectively as a government takeover.

According to an official announcement last week, founder Chen Feng was ousted from the company's Communist Party committee -- a core executive group akin to its board of directors -- in a sign of the Party's tightening grip over the firm's operations.

HNA is not the only conglomerate to be caught in the crosshairs of China's financial regulators.

Real estate empire Wanda, insurance provider Anbang and investment giant Fosun have all faced similar crackdowns in recent years after making debt-fuelled acquisitions, with some forced to sell off overseas assets.

More recently, Beijing halted the record-breaking IPO of Alibaba's fintech arm, Ant Financial, as regulators cracked down on billionaire entrepreneur Jack Ma's tech empire.