Shares of listed subsidiaries of struggling Chinese group HNA Group, once the driving force behind a wave of overseas Chinese deals, fell sharply after several revealed billions of dollars in funds had been hijacked.
The revelations were the latest ugly twist in the collapse of the conglomerate, originally a national airline operator that grew rapidly through a debt-fueled trading frenzy where it spent more than $ 40 billion, y included in participations in Deutsche Bank and hotel operator Hilton International.
In one declaration On the Shanghai Stock Exchange this weekend, Hainan Airlines Holding Co said “self-surveys” revealed billions of dollars in company funds were used for non-business purposes.
Hainan Airlines and two other HNA companies, CCOOP Group and HNA Infrastructure Investment Group, also said in documents that they did not disclose debt guarantees between the group companies.
Monday’s revelations sent shares in the publicly traded HNA division tumbling down. Hainan Airlines Holding Co and CCOOP Group fell nearly 10%, the daily limit for trading in Shanghai and Shenzhen.
Shen Meng, director of Chanson & Co, a boutique investment bank in Beijing, said much of the funds in question would likely not be recovered in full, which would have a “negative impact on the rights and interests of creditors. “.
The disclosures come as HNA’s creditors last week requested bankruptcy proceedings, after a court said the company was unable to pay its debts. HNA said it would cooperate and “support the court to protect the legal rights and interests of creditors.”
Before starting to falter under the weight of its debt-fueled deals and questions about its ownership structure, HNA rose to 170th on the Fortune 500 list of the world’s largest companies in 2017.
In recent years, it has come under pressure from Beijing over increased control of a group of expansionist conglomerates which also includes Anbang and Dalian Wanda.
Chen Feng, current chairman of HNA, was banned from boarding flights and using the bullet train last year after the group missed a court-ordered payment.
Wang Jian, co-founder and former president, died in 2018 while visiting the south of France. HNA’s main creditor, the state-owned China Development Bank, stepped in to cancel some of its investments in 2018 after Wang’s death.
The change in the political climate of large companies in China, which has contributed to a significant decline Chinese outbound investment, was greatly relieved last year when the initial public offering of fintech company Ant Group, which is expected to be the largest in the world, was canceled at the last minute.
Additional reporting by Sherry Fei Ju in Beijing