HNA Group, which is burdened with the largest debt in China’s history, has issued an official statement that the court has reorganized the group in bankruptcy because it cannot pay its debts. The Hainan Provincial High People’s Court is conducting a judicial review of the HNA Group.
It is expected to involve at least 700 billion RMB in debt, the largest corporate debt burst in China’s history.
The decision to apply for bankruptcy reorganization is based on a joint working group of HNA Group’s Hainan Province to map out HNA’s bottom line, reports a reporter for China’s No. 1 financial website. Since its arrival on Feb. 29, 2020, the joint working group has spent several months verifying the assets, liabilities and related transactions of HNA Group and its more than 2,000 enterprises one by one, and has sorted out the asset base, management structure, equity relations and debt relations of the entire group.
The report said that the joint working group formulated a bankruptcy restructuring plan based on the overall debt risk situation of HNA Group. Because of the complex structure of HNA Group’s equity, assets and debts, in order to protect the interests of all parties, the overall risk resolution plan of HNA Group was formed after many rounds of consultation among various parties, and gained the understanding and support of relevant departments for the bankruptcy restructuring idea. The subsequent stages will be implemented in accordance with legal procedures under the requirements of “rule of law and marketization”.
Bankruptcy reorganization refers to the appointment of a bankruptcy administrator under the auspices of the court, instead of liquidating an enterprise that meets the bankruptcy conditions but has the hope of being saved, to liquidate the enterprise’s debts and claims, formulate a reorganization plan, and carry out business restructuring and debt adjustment in order to help the debtor get out of financial difficulties and restore its business capacity.
Unlike bankruptcy liquidation, bankruptcy reorganization seeks to give a troubled but hopeful business a chance to recover by avoiding liquidation. The goal of the bankruptcy reorganization process is to revive the business and avoid liquidation, while the goal of bankruptcy liquidation is to enable creditors of the bankrupt business to be fairly paid and the bankrupt business to be wiped out.
The years from 2016 to 2017 were two years of crazy overseas mergers and acquisitions for HNA Group. in 2018, HNA Group suddenly suffered its first loss in its history, with a loss amounting to 4.9 billion yuan.