Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Credit

Our 20-Feb flash note put our recommendation on <a href="https://www.smartkarma.com/entities/hna-group-co-ltd" target="_blank" data-smartkarma-citation="entities:25987:1" rel="noopener">Hna Group (HNAGRZ CH)</a>'s SANYPH 21s under review on the Bloomberg news on 19-Feb that the Hainan Provincial Government is under discussion to take control of HNA Group Company Limited (HNA) and sell-off HNA’s airline assets. HNA’s senior management denied the talk existed, and that Bloomberg’s news was a rumor, according to China Business Daily on 20-Feb.
Over the past weekend, HNA’s management announced it would set-up a risk management committee to manage the company’s liquidity, in particular. The committee will comprise representatives from <a href="https://www.smartkarma.com/entities/china-development-bank" target="_blank" data-smartkarma-citation="entities:28423:1" rel="noopener">China Development Bank (SDBZ CH)</a>, Civil Aviation Administration of China (CAAC), and the Hainan Provincial Government.
According to South China Morning Post, HNA’s board of directors will appoint (1) Mr. Gu Gang, the Chairman of Hainan Development Holdings (HDH), as the group’s executive chairman and (2) Mr. Ren Qinghua, a director of the Hainan Yangpu Economic Development Zone (HYED), as a co-CEO, alongside the current CEO (Adam Tan). Both HDH and HYED are controlled by the Hainan Provincial Government.
Management said the change in board governance does not mean a takeover and/or a change of control. There are no other details on the acquisition or capital injection into HNA but we believe the event unfolding over the weekend tells us HNA’s potential default is now being taken more seriously by local and central governments.
And that seriousness has reduced HNA’s default probability, let alone cost of bankruptcy, for the group’s shareholders. We also believe the implementation of a government acquisition would be challenging as HNA's structure is complex. HNA has grown too fast and is too big that it needs to be broken down, and a restructuring of HNA could be best done under the state umbrella to ensure sufficient liquidity, in our view. The restructuring effort means bondholders need to pay more attention to a change of control and asset sales down the road as these two provisions could be triggered.
As we pointed out in our last flash note, the decision by the Hainan Provincial Government is not a surprise ( <a href="https://www.smartkarma.com/insights/hna-group-to-be-or-not-to-be-nationalized" target="_blank" data-smartkarma-citation="insights:36812" rel="noopener">HNA Group:  To Be or Not To Be (Nationalized)</a> ).

Our 20-Feb flash note put our recommendation on Hna Group (HNAGRZ CH)'s SANYPH 21s under review on the Bloomberg news on 19-Feb that the Hainan Provincial Government is under discussion to take control of HNA Group Company Limited (HNA) and sell-off HNA’s airline assets. HNA’s senior management denied the talk existed, and that Bloomberg’s news was a rumor, according to China Business Daily on 20-Feb.
Over the past weekend, HNA’s management announced it would set-up a risk management committee to manage the company’s liquidity, in particular. The committee will comprise representatives from China Development Bank (SDBZ CH), Civil Aviation Administration of China (CAAC), and the Hainan Provincial Government.
According to South China Morning Post, HNA’s board of directors will appoint (1) Mr. Gu Gang, the Chairman of Hainan Development Holdings (HDH), as the group’s executive chairman and (2) Mr. Ren Qinghua, a director of the Hainan Yangpu Economic Development Zone (HYED), as a co-CEO, alongside the current CEO (Adam Tan). Both HDH and HYED are controlled by the Hainan Provincial Government.
Management said the change in board governance does not mean a takeover and/or a change of control. There are no other details on the acquisition or capital injection into HNA but we believe the event unfolding over the weekend tells us HNA’s potential default is now being taken more seriously by local and central governments.
And that seriousness has reduced HNA’s default probability, let alone cost of bankruptcy, for the group’s shareholders. We also believe the implementation of a government acquisition would be challenging as HNA's structure is complex. HNA has grown too fast and is too big that it needs to be broken down, and a restructuring of HNA could be best done under the state umbrella to ensure sufficient liquidity, in our view. The restructuring effort means bondholders need to pay more attention to a change of control and asset sales down the road as these two provisions could be triggered.
As we pointed out in our last flash note, the decision by the Hainan Provincial Government is not a surprise ( HNA Group:  To Be or Not To Be (Nationalized) ).

Bloomberg reported on 19-Feb that the Hainan Provincial Government is under discussion to take control of <a href="https://www.smartkarma.com/entities/hna-group-co-ltd" target="_blank" data-smartkarma-citation="entities:25987:1" rel="noopener">Hna Group (HNAGRZ CH)</a> (HNA) and sell-off HNA’s airline assets, mainly to three biggest carriers ( <a href="https://www.smartkarma.com/entities/air-china-ltd-a" target="_blank" data-smartkarma-citation="entities:1080:1" rel="noopener">Air China Ltd (A) (601111 CH)</a>, <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-a" target="_blank" data-smartkarma-citation="entities:24749:1" rel="noopener">China Southern Airlines Co-A (600029 CH)</a> , and <a href="https://www.smartkarma.com/entities/china-eastern-airlines-co-a" target="_blank" data-smartkarma-citation="entities:27588:1" rel="noopener">China Eastern Airlines Co-A (600115 CH)</a>). We understand there is no confirmation from management yet.
China Business Daily reported today (20-Feb) that HNA’s senior management has denied the talk existed and that Bloomberg’s news was a rumor.

Bloomberg reported on 19-Feb that the Hainan Provincial Government is under discussion to take control of Hna Group (HNAGRZ CH) (HNA) and sell-off HNA’s airline assets, mainly to three biggest carriers ( Air China Ltd (A) (601111 CH), China Southern Airlines Co-A (600029 CH) , and China Eastern Airlines Co-A (600115 CH)). We understand there is no confirmation from management yet.
China Business Daily reported today (20-Feb) that HNA’s senior management has denied the talk existed and that Bloomberg’s news was a rumor.

HNA Group:  To Be or Not To Be (Nationalized)

China

HNA Innovation Co., Ltd. provides travel services. The Company mainly offers scenic development, tourist attractions management, hotel management, yacht marketing, and other services. HNA Innovation also conducts software development, information technology consulting, and other businesses.

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HNA Innovation Co Ltd (600555 CH)

HNA Group: Happy Nationalized Amnesty

Our 20-Feb flash note put our recommendation on Hna Group (HNAGRZ CH)'s SANYPH 21s under review on the Bloomberg news on 19-Feb that the Hainan...

Bondcritic

HNA Group: To Be or Not To Be (Nationalized)

Bloomberg reported on 19-Feb that the Hainan Provincial Government is under discussion to take control of Hna Group (HNAGRZ CH) (HNA) and sell-off...

Bondcritic

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