April 17, 2018 / 11:40 PM / 7 months ago

New Zealand says debts, liquidity problems at HNA behind decision to block lender purchase

SYDNEY (Reuters) - New Zealand’s Overseas Investment Office (OIO) blocked an attempt by China’s HNA Group to buy a vehicle finance firm in part due to doubts about the debt-saddled conglomerate’s financial stability, documents showed on Wednesday.

FILE PHOTO: A HNA Group logo is seen on the building of HNA Plaza in Beijing, China February 9, 2018. REUTERS/Jason Lee/File Photo

The OIO halted HNA’s planned $460 million purchase of New Zealand’s largest non-bank lender, Australia and New Zealand Banking Group’s (ANZ.AX) UDC, in December, citing uncertainty over HNA’s ownership structure.

Decision documents released on Wednesday showed the office was also concerned about the conglomerate’s debt and liquidity, as well as its complex structure.

HNA’s debt “appears to be substantially in excess of ... underlying assets,” the OIO said, which together with “well-known liquidity issues” at HNA “increases the likelihood of a default event”.

It added that HNA was unable to clearly explain its ownership structure and so concluded the deal should be rejected.

HNA, an aviation-to-financial services conglomerate best known as the owner of Hainan Airlines Co (600221.SS), did not immediately respond to requests for comment.

At the time the deal was blocked, an HNA spokeswoman said the decision was inconsistent with the views of other regulators around the world that had approved HNA and other Chinese investments.

HNA has announced acquisitions worth more than $50 billion in the past two years, but has faced increased questions about its governance since a July announcement outlining its ownership showed two shareholders were proxies for founding executives.

Chinese banks have privately and publicly voiced concern after HNA failed to repay some obligations, including aircraft lease payments, and as surging debt drove up the cost of the group’s short-term fund raising to new highs.

Since the start of the year, it has agreed to sell more than $10 billion in prime real estate in Australia, New York and Hong Kong, along with shares in Deutsche Bank (DBKGn.DE), Park Hotels & Resorts (PK.N), Hilton Grand Vacations Inc (HGV.N) and Hilton Worldwide Holdings (HLT.N), to service debts.

ANZ said last month it is considering an initial public offering (IPO) of UDC since the sale to HNA was blocked.

Reporting by Tom Westbrook; editing by Richard Pullin

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