On January 29, 2021, HNA Group received the Notice issued by the Hainan Provincial High People’s Court, the main content of which is: relevant creditors apply for the court to reorganize HNA Group in bankruptcy because our group cannot settle its debts as they fall due. It seems that, like many giants such as Founder and Brilliance, what crushed HNA was ultimately debt. This means that China’s fourth largest aviation group, with trillions of assets, HNA Group officially ushered in bankruptcy reorganization. After struggling to “save itself” for two or three years, HNA Group has completely surrendered.
On January 29, HNA Group, China’s fourth largest airline group with trillions of dollars in assets, was formally reorganized in bankruptcy.
On January 29, HNA Group’s official website and microblogging site, as well as relevant listed companies, issued announcements announcing that HNA Group was heading towards the “rebirth” of bankruptcy reorganization. HNA Group said that it will cooperate with the court to conduct judicial review, actively promote debt disposal, support the court to protect the legitimate rights and interests of creditors in accordance with the law, and ensure the smooth production and operation of the enterprise.
Note that the so-called bankruptcy reorganization we are talking about here means that when an enterprise becomes insolvent, the management can apply to the court for bankruptcy reorganization. Once the application is approved, the creditors are not allowed to collect debts from the bankrupt enterprise. The law allows the management of the same business to propose to the creditors a reorganization plan that defers the payment of debts, stops the payment of dividends, suspends the payment of principal on debts, pays interest only, and reduces unsecured claims. To put it bluntly, there are basically three ways to go about it: debt conversion, debt reduction and deferred interest payments on the debt, or indefinite deferred interest payments. Basically, it is equivalent to not paying back the debt.
In fact, HNA’s bankruptcy has long been known. Last year, HNA’s Internet finance company has repeatedly failed to pay in Time, and a number of HNA’s bonds have defaulted, and more than once, so you can see that HNA’s cash flow has gone awry.
On January 22, HNA Group released an announcement titled “HNA Group risk disposal is progressing well and will soon enter a critical period”, in which Gu Gang resigned as director and executive chairman of HNA Group and Ren Qinghua resigned as director and co-CEO of HNA Group. These are two weighty figures of HNA.
This is the first official announcement made to the public on February 29, 2020, nearly a year after the joint working group of Hainan Province’s HNA Group was stationed at HNA. This time, Hainan Province took over HNA, in fact, is in for the debt-ridden HNA to the bottom.
Come to a set of data to compare: 2019 Hainan Province general revenue is only 81.4 billion yuan, expenditure 185.9 billion, itself a deficit of 100 billion yuan. HNA debt has more than 700 billion, which is nearly nine times more than Hainan’s fiscal revenue, is seven times the deficit of a province of Hainan, the largest deficit province of Henan is only 600 billion, while the central fiscal surplus in 2019 is only 5 trillion, which means that the central government must take out one-seventh of the money to save HNA! HNA’s debt, why should the state treasury to underwrite? Have you ever thought about this question?
From the initial privatization of state-owned assets, HNA relied on debt crazy expansion, to as much debt as today after dumping to the Hainan Provincial Government, so that the government to take over 700 billion of debt, the essence of the whole taxpayers to bear the rotten debt.
And now it seems that the Hainan government is not peddling, and can not afford to peddle. In retrospect, the Hainan government parachuted two officials into HNA to do a good job of bankrupting it. It is indeed ironic that the secrecy was done well at first.
On January 26, the second congress of the Communist Party of China HNA Group Co., Ltd. was held in Haikou, and Gu Gang was elected secretary of the new HNA Group Party Committee. on January 29, HNA Group officials announced that relevant creditors applied to the court for HNA Group’s bankruptcy restructuring. This means that the working group has been in place for nearly a year, and HNA Group has been officially detonated artificially.
Let’s take a look at HNA Group’s sky-high liabilities. How did HNA Group come to the point of restructuring today? The reason is: the early blind “buy buy buy” big expansion into the debt crisis, coupled with the impact of the new crown pneumonia Epidemic, the main business of the aviation industry was greatly affected, the profitability of the snow, resulting in “self-help” to no avail.
Since the outbreak of liquidity risk at the end of 2017, HNA Group has actively carried out “self-help” with the support of all parties, but failed to completely resolve the risk.
In the past few years, HNA has been expanding wildly, buying and buying all over the world, but it could not digest more than it bought, and the quality of many assets was also problematic, resulting in heavy debts, and HNA has been plagued by liquidity problems over the years. In the past few years, HNA has been selling assets at a global loss to save itself, so it can be said that in the world is also full of embarrassment. The founder of HNA, Chen Feng, who graduated from elementary school level, also boarded the Harvard lecture, and the speech was about metaphysics, which was even more of a spectacle.
However, in July 2018, the former chairman of HNA Group, Wang Jian, died mysteriously in France, which further plunged HNA Group into a stormy situation. It can be said that Wang Jian’s mysterious death is the outbreak of HNA’s total contradiction and total crisis, which gave HNA a fatal blow.
HNA Group, which is burdened with the largest debt in China’s history, officially issued a statement that the court reorganized the group in bankruptcy due to its inability to repay its debts. Chen Feng, the founder who had faded from the business frontline, returned to the helm of the HNA Group as its chairman, and Chen Feng unapologetically mentioned HNA’s “liquidity risk” repeatedly. He said in a speech in 2019: “In short, we are not prepared, so there is no HNA can not buy before ‘buy buy’; now and ‘sell sell sell’, and the world’s most disposed of assets. Assets, we have disposed of more than 300 billion assets, in such ups and downs we reflect deeply.” What he deeply reflected on is of course the blind debt expansion of HNA beyond its own capacity.
Over the past few years, HNA’s debt, like HNA’s shareholding structure, has been the subject of widespread attention both at Home and abroad, and can be considered a mystery. By the end of June 2019, HNA Group had total assets of 980.6 billion yuan and total liabilities of 760.7 billion yuan, with an asset-liability ratio of 72.07%, equivalent to 72% of all money borrowed. With 95.1 billion yuan of short-term borrowings and 309.8 billion yuan of current liabilities, the pressure of debt servicing is very high.
The world’s enterprises, to expand rapidly, there are only two ways: one is to use their own core technology and unique management model, diversification, to achieve corporate fission; the second is to use large-scale debt, mainly bank credit, crazy purchase, to achieve the exaggeration of the scale of the enterprise, as to whether the assets purchased can be digested, whether it can be profitable, are not a short-term consideration of the enterprise. HNA undoubtedly belongs to the latter.
In 2003, HNA suffered the biggest crisis in its history, is an annual loss of nearly 1.5 billion, almost standing on the verge of collapse. After 10 years of development, by 2013, HNA’s asset size has reached 266 billion yuan. By now the size of HNA has basically reached 1 trillion, but the debt of which is up to more than 700 billion.
For an airline with no core technology and business, what makes it possible to borrow so much money is the biggest question. In the past two years, HNA Group is all supported by 700 billion credit from China Development Bank, Agricultural Bank, Construction Bank and other banking groups, and as of the end of 2019, HNA has a total of 397.5 billion credit funds at no cost. It can be said that the unlimited credit support from banks and other financial institutions to HNA is the key to HNA’s ability to support up to now. And this unlimited amount of credit line can be said that it is not the general enterprise can get.
And now HNA filed for bankruptcy reorganization, which means that these debts will probably be significantly reduced, or a write-off. These debts, squandered by HNA, but turned into bad debts of state-owned banks, eventually paid for by the state-owned financial companies funded by the central bank and the Ministry of Finance, because when the stripping of bad debts of commercial banks is about to start this year, most of HNA’s 700 billion debts will be stripped as bad assets of banks, and eventually paid for by all taxpayers.
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