Avolon parent HNA keeps borrowing despite debt fears
Units of HNA Group are stepping up fundraising in the Chinese bond market even as borrowing costs soar, adding to concerns about the Chinese conglomerate's debt burden.
Yunnan Lucky Air, a unit of HNA's flag carrier Hainan Airlines sold a 270-day yuan bond to yield 8.2pc last week, the highest coupon rate ever for the Yunnan airline. Tianjin Airlines, another subsidiary of Hainan Airlines, issued similar-maturity notes at the highest coupon rate in five years in November. HNA is the parent company of Irish-run, Irish-founded aircraft lessor Avolon.
While surging onshore bond yields last month forced Chinese companies to cancel the most bond offerings since April, HNA's units didn't slow their pace of financing. They revived debt sales from November, following a lull after news emerged in June about a crackdown by China's banking regulator. The accelerated fundraising suggests a need for money and may hurt the conglomerate's credit profile, according to credit research firm Bondcritic.
"They just keep piling on debt," said Warut Promboon, managing partner at Bondcritic. "It's not going to work."
HNA chief executive Adam Tan said last week the Chinese conglomerate is considering selling assets, suggesting the company is reversing a spree that cost tens of billions of dollars and strained its finances.