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.

The Chinese Credit Chronicle: The CCC Danger

The China Credit Chronicle:  Hazardous National Anecdote

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

The Week That Was in ASEAN@Smartkarma - Virus Korona, Bank Mandiri, and DBS

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Credit

Last year, we saw the incoming of the Hainan Provincial Government 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 the potential sell-off HNA’s airline assets as spread positive for SANYPH 10/21s. The bonds rose to the high 70s before coming down to the high 40s in May on a series of negative headlines such as <a href="https://www.smartkarma.com/entities/hna-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29923:1" rel="noopener">HNA Technology Co Ltd (600751 CH)</a>’s default on a USD4bn loan from <a href="https://www.smartkarma.com/entities/agricultural-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1120:1" rel="noopener">Agricultural Bank Of China (1288 HK)</a> to finance the USD6bn buyout of Ingram Micro in 2016. (HNA agreed to sell Ingram Micro to Platinum Equity, a US private equity firm, last December for USD7.2bn.)
Asset sales have slowed due to a COVID-19 impact on the valuation of travel-related assets but the effort was on-going with financial support from Chinese banks, especially <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>. The bankruptcy notice on 29-Jan proved that asset sales, credit facilities, and new management set up by the provincial government are simply not sufficient to keep HNA afloat. Both SANYPH 10/21s and HONAIR Perp fell about 10 points on the bankruptcy news.
The most important piece of recent news on HNA is the CNY109bn embezzlement (and hidden debt guarantee) figure which appears to us as the tip of the iceberg.  COVID-19 and the corporate governance issues will make it difficult to conclude on HNA’s recovery value on its bonds. Hence, even at 30c on the dollar, we cannot recommend buying HNA-related bonds including both SANYPH 10/21s and HONAIR Perp.

Last year, we saw the incoming of the Hainan Provincial Government to take control of HNA Group (HNAGRZ CH) (HNA) and the potential sell-off HNA’s airline assets as spread positive for SANYPH 10/21s. The bonds rose to the high 70s before coming down to the high 40s in May on a series of negative headlines such as HNA Technology Co Ltd (600751 CH)’s default on a USD4bn loan from Agricultural Bank Of China (1288 HK) to finance the USD6bn buyout of Ingram Micro in 2016. (HNA agreed to sell Ingram Micro to Platinum Equity, a US private equity firm, last December for USD7.2bn.)
Asset sales have slowed due to a COVID-19 impact on the valuation of travel-related assets but the effort was on-going with financial support from Chinese banks, especially China Development Bank (SDBZ CH). The bankruptcy notice on 29-Jan proved that asset sales, credit facilities, and new management set up by the provincial government are simply not sufficient to keep HNA afloat. Both SANYPH 10/21s and HONAIR Perp fell about 10 points on the bankruptcy news.
The most important piece of recent news on HNA is the CNY109bn embezzlement (and hidden debt guarantee) figure which appears to us as the tip of the iceberg.  COVID-19 and the corporate governance issues will make it difficult to conclude on HNA’s recovery value on its bonds. Hence, even at 30c on the dollar, we cannot recommend buying HNA-related bonds including both SANYPH 10/21s and HONAIR Perp.

Hainan Meilan International Airport (357 HK)

HNA Group

HNA Group: Bamboozled