Some airlines affiliated with China’s HNA Group Co Ltd (海航集團) are delaying aircraft lease payments to lessors, and Export-Import Bank of China (EXIM Bank), which is a long-term financer of the group, has formed a team to handle the conglomerate’s liquidity issues, several banking and leasing sources said.
Executives from leasing units of Chinese lenders, including Bank of China Ltd (中國銀行), China Minsheng Banking Corp Ltd (中國民生銀行) and Bank of Communications Co Ltd (交通銀行), have held talks with some HNA-linked airlines to recover payments, the sources said.
“Some payments have been delayed by over two months,” said one senior Beijing-based executive at a Chinese lessor.
HNA airlines had informed the lessor that payments would be made soon, as they expect banks to support HNA in coming months, he said.
HNA, an aviation-to-financial services conglomerate, said in a statement that “HNA and its subsidiaries are maintaining stable operations, and are in the process of gradually paying each lessor’s fees as planned.”
HNA’s US$50 billion worth of dealmaking over the past two years, which included investments in Deutsche Bank AG and the Hilton International Hotel Group, has sparked intense scrutiny of its opaque ownership.
The Chinese government in June last year told major banks to review their credit exposure to HNA and a handful of other non-state companies, putting pressure on its finances.
Some of the sources from lessors and banks said that HNA’s flagship Hainan Airlines (海南航空) and smaller ones, including Lucky Air (翔鵬航空) and Capital Airlines (首都航空), had missed payments, while Tianjin Airlines (天津航空) was seeking to extend the term for payments due this year.
The sources declined to be named because of the sensitivity of the matter.
Hainan Airlines on Wednesday last week suspended trading pending an announcement. The reason for the share suspension is unclear.
Tianjin Airlines has asked a Chinese lessor to delay June rental payments for three aircraft, said one source with direct knowledge.
Another source said one HNA-affiliated airline has told Bank of Communications Financial Leasing that it will not be paying rental payments due this month.
He did not name the airline.
In the past few weeks, executives from some international lessors have flown to China to meet executives at HNA-affiliated airlines and thrash out a repayment plan, the sources said.
“This is a widespread issue among many lessors, but they understand that a lot depends on whether banks reopen their funding for HNA and lessors are betting on that,” said one financier at a European bank.
In November, Airfinance Journal reported that the delays in lease rental payments and the problems have intensified since then, the sources said.
However, BOC Aviation Ltd chief executive officer Robert Martin said that his company, the leasing unit of Bank of China, did not have problems on lease payments by HNA-linked airlines.
“BOC Aviation has very strong focus on receivables management and we ended 2017 with a collection rate of 99.9 percent. This included airline subsidiaries of the HNA Group,” Martin said in an e-mail.
Faced with a slew of repayment obligations and concerns about rising financing costs, HNA had its creditworthiness downgraded in November by S&P Global Ratings, as a result of its “aggressive financial policy.”
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