HNA 'regaining control of troubled airline'

Business | Tereza Cai 12 Jul 2019

There are market rumors that mainland conglomerate HNA Group may be able to regain control of troubled Hong Kong Airlines again, with new investors being introduce as soon as this month.

Debtwire reported that Zhong Guosong, one of Hong Kong Airlines' major shareholders, said the disputes among the carrier's shareholders have calmed down, and HNA would take control of the airline again.

Meanwhile, local media also reported that the airline has gradually received funds since June, and paid off some debts, including the US$50 million (HK$390 million) owed to engine-maker Rolls Royce, which was due three years ago.

The investment discussion involved Hong Kong Airlines Holdings, which indirectly owns 31.14 percent of Hong Kong Airlines.

Zhong has a 46.04 percent stake in the holding company.

In May, he condemned Frontier Investment Partners' former director Zhang Ziyan for selling all of FIP's stake in the airline - which made Zhong lose control - calling the sale illegal.

Hong Kong Airlines has repeatedly required financing, and it needs to introduce high value shareholders to convince credit investors that the airline has the capability to repay debt, according to the Debtwire report.

The airline's managers claimed they did not break the interest coverage promise on the US$683 million perpetual bonds with a 7.125 percent coupon rate, but that has yet to be confirmed by the auditor. It should keep the interest average rate above 2.25 times, and if the company violates that, it needs to pay 500 basis points incremental interest rate, and cannot request a waiver.

Japanese media had reported in June that eight Hong Kong Airlines flights arriving at Narita International Airport were found to be missing aircraft components, which were believed lost in the course of flying.

A total of 19 components were missing from the airline's planes on four consecutive days from June 26 to June 30, the media report said, resulting in safety concerns over traveling with Hong Kong Airlines.

The Hong Kong Civil Aviation Department said it has ordered the company to conduct a deep investigation, and strengthen its aircraft maintenance work.

Elsewhere, China's Dajia Insurance will set up a property and casualty unit to take over part of Anbang Insurance's assets, the country's regulator said yesterday.

The China Banking and Insurance Regulatory Commission published the statement on its official website.

Dajia Insurance, approved by the China Banking and Insurance Regulatory Commission, has more than 20 billion yuan (HK$22.77 billion) in registered capital, held by the China Insurance Security Fund, with smaller stakes held by state-owned oil giant Sinopec (0386) and Shanghai Automotive Industry.

 

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