HNA Group Pledges Postal Bank Shares in Deal to Borrow Cash

(Bloomberg) -- HNA Group Co. used part of its stake in Postal Savings Bank of China Co. to borrow money, as the Chinese conglomerate seeks to boost liquidity amid concerns debt from acquisitions is weighing on its finances.

HNA pledged 919.3 million shares, a 4.13 percent stake, at HK$3.08 apiece on Dec. 15, the group said in a filing late Thursday, without saying how much it borrowed. HNA lent the shares to institutional investors as part of a financing arrangement that doesn't reduce its holding in the bank, a representative of the company said in an email. Postal Bank shares closed at HK$4.04 Thursday.

More: Behind China's Boldest Dealmaker, Billions in Pledged Shares

HNA, which announced more than $40 billion of acquisitions since the start of 2016, is now saddled with about $28 billion in short-term debt that is more than its cash pile. Interest expenses have surged above levels it can cover through earnings, and it may have paid more interest than any other non-financial company outside of the U.S. and Brazil. Officials at HNA have said the group has a “healthy and stable debt structure” and ruled out any default in the coming year.

“Using Postal Savings Bank stocks as collateral can give HNA a stock loan at better terms,” said Warut Promboon, managing partner at credit research firm Bondcritic Ltd.

In a separate filing, China International Fund SPC disclosed an increase in its stake in Postal Savings Bank by 919.3 million shares, citing interests through a securities borrowing and lending agreement.

HNA invested more than HK$7 billion in Postal Savings Bank shares at their IPO price of HK$4.76 apiece last year.

To contact the reporter on this story: Prudence Ho in Hong Kong at pho83@bloomberg.net.

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Sam Nagarajan

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