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HNA Group to offload more non-core assets
The embattled Chinese conglomerate HNA Group is reportedly planning to sell off another 100 billion yuan of assets on top of the nearly 300 billion yuan of sale completed this year, amid continuing efforts to offload non-core assets in bid to correct its previous aggressive expansion. 

The Chinese aviation giant plans to pivot back to its main business, covering the entire industry chain while all irrelevant assets in sectors like real estate or finance would be disposed of, reported the 21st Century Business Herald, a Guangzhou-based newspaper.

Although the HNA Group hopefully will ease its liquidity crunch through asset sales, it remains challenging for the group to depend on its airline business’ meager profit to make a comeback.

On November 20, Hainan Airlines Holding, HNA’s aviation unit announced that it will sell 40 percent of its shares in the unprofitable Urumqi Air to the Urumqi municipal government to boost the latter’s stake in the local carrier to 70 percent, with Hainan Airlines holding the remaining 30 percent.

This belongs to part of HNA’s asset restructuring efforts.

Over the past one year, HNA Group’s liquidity challenges have kept it busy with paying back debts, through borrowing and asset sales. “Since this year, HNA Group has sold a total of 300 billion yuan of assets, relieving capital pressure to a certain extent,” HNA Group Chairman Chen Feng told the 21st Century Business Herald.

Even so, this is still not enough. It’s reported by the 21st Century Business Herald, the future asset sales would beat 300 billion yuan, and none of those would be related to the airline business. It’s expected that as the sell-off continues, the liability ratio of the group would go down for eight years in a row.

Between 2015 and 2017, HNA’s Fortune 500 ranking improved by over 100 places every year. In 2017, the conglomerate gained its highest ranking, and it’s known the years of heavy spending on offshore acquisitions had empowered the breakneck expansion.

In the eyes of Chen Feng, the growth lacked a solid footing.

It’s unknown how many assets exactly HNA had acquired during the three years, but by the end of 2014, the total assets of the company climbed to 322.6 billion yuan while by the end of 2017, the figure exploded to 1.232 trillion yuan, with a sharp growth of 282 percent.

Beneath the exploding growth, potential risks began to mount. “From 2016, the growth in HNA’s non-liquid assets considerably outpaced its liquid assets,” a fixed income analyst with a major domestic securities dealer said, noting although most of them are of high quality, risks brought by liquidity strain could hardly be mitigated.

“Before the end of last year, HNA had been winning. Those young investment teams kept going forward. Acquisitions like $6.5 billion for Hilton was made without second thought. At the time, there were quite a lot of good-bargain assets overseas. We wanted to buy all things good and low-priced,” he said.

Chen Feng told the 21st Century Business Herald he felt regretful for the past global acquisition spree. “We deviated from the basic principles of investment. The growth was too fast to be steady and sometimes, it went outside our main business. External factors have changed. With not enough experience and lack of prudence, the problem of liquidity hit,” Chen said.

From the beginning of 2017, HNA’s liquidity crunch started to show. According to Chen, in the bond market, they paid back over 30 billion yuan and another 100 billion yuan to banks in 2017. “So, naturally there would be the problem with liquidity.”

Chen emphasized it was the right decision to start the sales push from the latter part of last year, considering many enterprises have come across the same problem since this year.

He disclosed the company would further broaden the sales push.

According to the 21st Century Business Herald, the future sales scope would surpass 300 billion yuan, and all the assets sold would be unrelated to airline business.

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