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.

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

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Credit

<a href="https://www.smartkarma.com/entities/25987" target="_blank" data-smartkarma-citation="entities:25987:1">Hna Group (HNAGRZ CH)</a>  (HNA)’s recent negative headlines worried us on the group’s liquidity despite the expectation of support from the Chinese bank consortium, led by China Development Bank. CWT International (CWTI) defaulted on 16-April and had assets seized by creditors. <a href="https://www.smartkarma.com/entities/24023" target="_blank" data-smartkarma-citation="entities:24023:1">Hainan Airlines Co (600221 CH)</a> received an adverse opinion from its auditor. Hong Kong Airlines have gone into a legal battle between major shareholders to investigate inter-company transactions with HNA.
HNA has so far repaid its USD bond obligations under our coverage (SANYPH 11/18s, SANYPH 12/18s, HONAIR 1/19s, and GRCHAR 3/19s). Our base case scenario calls for the Chinese bank consortium to support HNA’s solvency but HNA’s large empire and our perception of lagging corporate governance could lead to defaults similar to the CWTI case. The fact that HNA’s airlines are also in financial troubles tells us HNA’s debacle is far from over.
We cannot rule out HNA’s defaults (even though we expect HNA to pay back the debt thereafter) and do not consider the bonds as investible by asset managers. However, for retail investors who can stomach the volatility and a technical default, we still expect a full recovery from SANYPH 8/19s. We maintain our UNDERWEIGHT recommendation on SANYPH 8/19s, HAIAIR 10/20s, SANYPH 10/21s, and HONAIR Perpetual.

Hna Group (HNAGRZ CH)  (HNA)’s recent negative headlines worried us on the group’s liquidity despite the expectation of support from the Chinese bank consortium, led by China Development Bank. CWT International (CWTI) defaulted on 16-April and had assets seized by creditors. Hainan Airlines Co (600221 CH) received an adverse opinion from its auditor. Hong Kong Airlines have gone into a legal battle between major shareholders to investigate inter-company transactions with HNA.
HNA has so far repaid its USD bond obligations under our coverage (SANYPH 11/18s, SANYPH 12/18s, HONAIR 1/19s, and GRCHAR 3/19s). Our base case scenario calls for the Chinese bank consortium to support HNA’s solvency but HNA’s large empire and our perception of lagging corporate governance could lead to defaults similar to the CWTI case. The fact that HNA’s airlines are also in financial troubles tells us HNA’s debacle is far from over.
We cannot rule out HNA’s defaults (even though we expect HNA to pay back the debt thereafter) and do not consider the bonds as investible by asset managers. However, for retail investors who can stomach the volatility and a technical default, we still expect a full recovery from SANYPH 8/19s. We maintain our UNDERWEIGHT recommendation on SANYPH 8/19s, HAIAIR 10/20s, SANYPH 10/21s, and HONAIR Perpetual.

HNA Group

HNA Group Limited : May Day