HNA Turns to Private Equity for Funding with Share Pledge

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HNA Group, the heavily leveraged Chinese conglomerate, has turned to private equity company Pacific Alliance Group for finance amid pressure to raise cash and cut its debt, the Financial Times reported. Hainan-based HNA, which started as an airline company before expanding into finance, announced on Wednesday that it had pledged about 1.4bn of shares — amounting to HK$3.1bn ($396m) — from one of its subsidiaries, to borrow from privately owned PAG Holdings. HNA said in an exchange filing that PAG Holdings, which is domiciled in the Cayman Islands, would have the option to buy up to 82 per cent of its stock, if the value of its pledged shares relative to the loan size falls below a certain threshold. One banker said the move is a sign that HNA Group might be finding it difficult to access mainstream markets as large international banks have either pulled back or have ruled out advising or financing the company. “Basically the taps have been turned off so they are looking at any way to raise financing,” the banker said. “There’s a good chance we will see debt restructuring this year.” Read more. (Subscription required.)