HNA Executive's Death Risks More Turbulence at Debt-Laden Giant
HNA executive’s sudden death adds to its list of problems, including a $94 million debt.
(Bloomberg) -- The turmoil deepened at HNA Group Co., the Chinese conglomerate that’s been selling billions of dollars in assets to stay afloat, after its No. 2 executive died while touring southeastern France.
Co-Chairman Wang Jian, who helped found the group more than two decades ago, fell from a height of about 15 meters (49 feet) on Tuesday while having his photograph taken in the village of Bonnieux, a police officer said, adding that the death wasn’t viewed as suspicious. HNA declined to comment beyond saying the 57-year-old, in France on business, died after an accidental fall in Provence.
Wang’s sudden death comes as HNA, one of China’s most indebted companies, is undertaking an urgent restructuring. It was showing signs of putting its biggest problems behind it. People familiar with the matter said last month that China’s top leaders had agreed to help the company, which couldn’t generate enough profit in 2017 to pay interest expenses.
“Wang Jian’s death will definitely bring short-term shocks to HNA’s business development,” said Liu Feng, director of the Hainan Normal University Free Trade Port Research Center. “But the long-term impact on the group will be limited.”
Wang was second only to Co-Chairman Chen Feng within HNA’s hierarchy, and owned about 15 percent of the conglomerate, making him one of the group’s biggest shareholders, according to HNA’s last update of its ownership structure. Chen also holds a 15 percent stake. HNA said last year that its executives plan to donate all their shares to the Cihang charities that own a majority of HNA should they resign or die. Eventually, HNA expects the foundations to own 100 percent of the group, the company said at the time.
Wang was instrumental during HNA’s era of empire-building and its subsequent dismantlement. The company, which once symbolized China’s insatiable appetite for global assets, has since reversed course by selling more than $14 billion of buildings and shares this year, including its multibillion-dollar stake in Hilton Worldwide Holdings Inc.
Wang lost his balance as he attempted to climb onto a retaining wall next to a rock at the highest point in Bonnieux, a scenic village, said Lieutenant-Colonel Hubert Meriaux, a police officer in nearby Avignon. An autopsy conducted Wednesday morning didn’t reveal anything suspicious in his death, he said.
Though he rarely spoke to the media, Wang, along with Chief Executive Officer Adam Tan, often served as the face of HNA to global investors and partners. At a lavish event in March 2017 on the 100th floor of the International Commerce Centre in Hong Kong, Wang was HNA’s top dignitary at a party with hundreds of guests, including some of the city’s top bankers, to mark the establishment of a finance unit. Also in attendance were executives at Glencore Plc, which hours later announced the $775 million sale of a majority stake in its oil storage and logistics business to HNA.
He was also the guest of honor at the Jewish Museum’s 31st annual Purim Ball at the Park Avenue Armory in New York last year, where he was presented with a gift in front of 700 guests -- a crystal bowl decorated with two gold roosters -- to mark the Chinese calendar’s year of the rooster.
Read more about the travails of HNA:
Wang spearheaded the group’s expansion in recent years, when it spent more $40 billion snapping up trophy assets and became the largest shareholder in international giants like Deutsche Bank AG and Hilton, according to people close to HNA. Setting up the finance unit in Hong Kong and pushing into new media were his ideas, the people said. An HNA representative couldn’t immediately comment.
Wang, a devout Buddhist, set a goal for HNA to become one of the top companies in the Fortune 500, arguing it would be the most efficient way to raise its profile, one of the people said. HNA ranked 170th on the list last year, rising 183 spots.
He didn’t just focus on the big picture, according to one of the people. His attention to detail extended to choosing office furniture and installing a statue of Guan Yu, a legendary general during China’s Three Kingdoms period, in one of HNA’s offices in Hong Kong.
“Wang’s passing will mark the end of an era,” said Corrine Png, CEO at Crucial Perspective Pte., a Singapore-based research firm focused on transportation. “It will also put HNA Group and related companies’ restructuring plans back on the drawing board.”
Wang obtained an undergraduate degree in Aviation Management from Civil Aviation University of China in 1983, and a master’s degree in business administration from Maastricht School of Management in 1995, according to HNA. In 1990, he helped establish Hainan Provincial Airlines Co. and was one of the founders of the group.
Following its now-infamous acquisition spree, the group’s financial struggles began to emerge in the middle of last year, when the Chinese government began scrutinizing high-profile acquirers such as HNA, Dalian Wanda Group Co. and Anbang Insurance Group Co. Borrowing costs soared as its interim report showed the conglomerate paid the highest interest expense among non-financial companies in Asia, a trend that continued through 2017. HNA’s latest annual report showed the group had more than $90 billion in debt.
Concerns about HNA’s financial situation mounted in the ensuing months. In November, HNA sold China’s most expensive short-term dollar bond, and a month later China Citic Bank Corp. said a unit of the group had repayment difficulties. In January, as the volume of news about HNA’s liquidity issues peaked, it suspended six of its listed stocks from trading.
The financial concerns have been easing in the last few months after a flurry of asset sales, including its $6 billion sale of Hilton Worldwide shares, helping many of HNA’s bonds rebound from record lows. In June, HNA sold a bond in China after a rare five-month drought, signaling a crucial source of funding for the conglomerate may be opening up.
--With assistance from Dong Lyu, Carrie Hong, Matthew Campbell and Daniela Wei.
To contact the reporters on this story: Prudence Ho in Hong Kong at firstname.lastname@example.org;Geraldine Amiel in Paris at email@example.com
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