Bondholders Stranded as HNA-Backed Airport Defaults
In a departure from HNA Group Co.’s record of paying back international bondholders despite its financial constraints, an airport partly owned by units of the Chinese conglomerate has failed to repay holders of its dollar bonds on time.
The default comes about a month after HNA Group redeemed a $300 million bond as planned. That earlier repayment had helped bolster confidence that holders of other offshore HNA bonds would be made whole.
However, Haikou Meilan International Airport didn’t repay a $200 million bond due Sept. 6, a debtholder said. This bondholder said the trustee for these securities sent a notice on Sept. 17 notifying investors that Haikou Meilan had failed to make the required payment. The airport is 28.6% owned by HNA-related companies, according to an onshore bond prospectus issued in March.
Haikou Meilan’s nonpayment was earlier reported by Debtwire.
Haikou Meilan’s bond is the eighth Asian dollar bond to default this year, an ANZ report said, adding that two or three more such defaults could come in the fourth quarter.
The borrower operates one of two airports on Hainan, the island off mainland China’s south coast that HNA has helped develop into a center for domestic tourism. Haikou Meilan airport serves the provincial capital, Haikou. The company has no single controlling shareholder but, in total, state entities hold about 55% of its shares.
A HNA spokeswoman declined to comment. Haikou Meilan’s Hong Kong office didn’t reply to a letter requesting comment.
Last month, a person familiar with the matter said it had delayed paying some wages. Earlier this year, a Hong Kong-listed unit fell behind on loan repayments. And several investors say an HNA-linked financing platform in China has failed to meet obligations on high-yielding investments known as wealth-management products.
HNA Group’s outstanding bonds have barely traded since Sept. 6, said a credit trader. Two of HNA’s U.S. dollar bonds due next January were unchanged at cash prices of 80 cents and 78 cents on the dollar, he said, adding that its 6.25% bonds due 2021 were also little changed at 68 cents on the dollar. The low prices indicate some skepticism that these bonds will be repaid in full.
A hedge-fund investor who had bought Haikou Meilan’s bonds last month said he sold his holdings at a few percentage points below face value before the due date. He said this was because, unlike the August bonds, there was no clarity this time on where the money would come from to repay the debt.
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8