• HNA sell-off continues

HNA Group is expected to move to dispose of its 25% stake in Hilton Worldwide after selling its holding in Hilton Grand Vacations and Park Hotels & Resorts.

The Chinese investor has been pulling back from its overseas investments amidst concerns over liquidity.

At Hilton Grand Vacations HNA sold 22.3 million shares at USD46.25 a share. Separately, HNA sold 2.5 million shares back to Hilton Grand Vacations for USD44.75 each, with the shares being retired.

Earlier this month HNA sold its 25% stake in Park Hotels & Resorts for USD1.24bn, selling over 39 million at USD25.75.

Tom Baltimore, chairman & CEO, Park, said: “While HNA has been a valued partner over the last 12 months, I am pleased to announce our stockholder base has now been substantially broadened while eliminating market concerns of a potential sale.

“We were thrilled by the institutional investor support for our stock, with the order book over five times oversubscribed and shares priced at just a 1.5% discount to last Tuesday’s closing price of USD26.15. We remain committed to our guiding principles of demonstrating operational excellence, prudently allocating capital and maintaining a strong balance sheet to create long-term stockholder value.”

As part of the sale, Park repurchased 14 million shares out of HNA’s total holding of over 53 million, for USD348m. All 14 million shares repurchased from HNA were retired.

Baltimore said: “Using substantially all of the proceeds from our recent non-core asset sales to repurchase our stock was both accretive to NAV and FFO. And with our stock trading at a significant discount to NAV, there was no more appropriate use of our cash – and validation of our belief in Park, our team and our strategy.”

Eyes are now on HNA to see what it plans to do with its 26% holding in Hilton Worldwide, which has been valued at around USD6.7bn. Hilton’s president & CEO Chris Nassetta told Bloomberg television: “It’s been a question that we’ve had from lots of investors. It will eventually resolve itself, and in the interim it does create a little bit of uncertainty, and there’s not a whole heck of a lot that I can do about it.”

As reported elsewhere in this week’s issue, HNA Group is expected to sell its stake in NH Hotels Group in Spain and focus its attention on Radisson Hotel Group. It could also look to exit other investments which are no longer allowed by China’s government, which would include its minority stake in Red Lion Hotels, bought in 2015.

The sell off has extended beyond hotels, with speculation linking HNA Group to the sale of a portfolio of properties in China valued at USD2.2bn. In Australia, the end of last month saw Virgin Australia scrap plans to potentially go private, raising concerns that HNA Tourism, which holds 20% of the group, might be looking to exit.“Following discussions with the major shareholders the board has decided not to privatise the company,” said chairwoman Elizabeth Bryan.

Reports have suggested that HNA Group is suffering from liquidity issues, after spending close to USD50bn over two years. A bond offering from HNA Group International Company, its offshore funding arm, at the end of 2017 saw it pay 9% for a one-year loan. The unit also pledged a EUR21m stake in NH to back a short-term loan. At the end of last year S&P warn that HNA’s funding costs were “meaningfully higher” than a year ago, causing it to cut the company’s group credit profile.

At the beginning of this year Goldman Sachs said that the HNA group had “strong cash generating assets”, but warned over debt and cash flow mismatches among some of the subsidiaries. The group had 16 subsidiaries at the last count and last year responded to accusations that its organisation was opaque, disclosing that two charities owned 52% of the conglomerate, with 12 of its executives holding most of the rest.

November saw Xin Di removed as chairman and CEO of HNA Tourism Group, in what the company called a “normal personnel adjustment”.

HA Perspective [by Katherine Doggrell]: The Communist way is not to stand out from the crowd, but to keep one’s head down and enjoy the matching jackets. HNA stood too high above the parapet, with the likes of Dalian Wanda and Anbang, and made itself stand out far too much. Trophy assets indeed. How gauche.

So now it must pull back. Not only to address the issue of its debt and onerous looming repayments, but to bring it back in line with China’s government, lest it forget that they are all in it together in this wonderland.

HNA appears to have taken note with its current investment strategy, having recently bought both logistics business CWT and a stake in commodity trader Glencore’s petroleum storage unit. These are much more in line with the Belt and Road project along the old silk road, leaning more towards infrastructure and less towards marble hotel lobbies. Now the rest of the group’s hotel holdings must be shaken out, leading us to keep a close eye on what’s happening at Radisson Hotel Group.

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