HONG KONG: China’s HNA Group sought to allay growing concerns that the massive conglomerate is facing a liquidity crunch and may need to dispose some recent acquisitions, including stakes in Deutsche Bank and Hilton.

Zhao Quan, head of HNA’s tourism division and the group’s newest board member, told Reuters on Friday in a telephone interview from Haikou city in southern China that adjustments in the group’s portfolio had started earlier, and the company was not selling its holdings “blindly”.

HNA has not “suddenly started to liquidate assets”, said Zhao, who added the company has been disposing of non-core businesses in line with group strategy. Zhao dismissed “outside speculation” that the group is facing a “liquidity crisis”.

Zhao’s comments come against a backdrop of a slew of repayment obligations and concerns about rising financing costs at the indebted airline-to-property conglomerate. HNA’s $50 billion worth of deal-making over the past two years has sparked intense scrutiny of its opaque ownership and use of leverage.

Among its most high-profile purchases has been a 25 per cent stake in Hilton for $6.5 billion and a 9.9 per cent stake in Deutsche Bank.

Zhao characterized both share purchases as “successful” financial investments, as well as “profitable”. “We hope to have more cooperation with both companies,” he said.

HNA has “significant” debt maturities over the next several years and its funding costs are “meaningfully higher” than from a year ago, ratings agency S&P Global Ratings said last month.

Pressure on HNA’s finances has risen after the Chinese government told major banks in June to review their credit exposure to HNA and a handful of other companies.

HNA Group is a Chinese conglomerate headquartered in Haikou, Hainan, China. Founded in 2000, it is involved in the aviation, real estate, financial services, tourism, logistics, and other industries. It is part owner of Grand China Air, and owns 25 per cent of Hilton Worldwide.

HNA Group was ranked 170th in 2017 Fortune Global 500 list. It is one of the most active investment companies in the world, acquiring numerous assets under its name. In 1993, Chen Feng established Hainan Airlines on behalf of the Hainan Provincial People’s Government. Following a restructuring of the airline in 1997, Feng founded HNA Group, as the parent company of Hainan Airlines in January 2000.

Reuters