Documents released on April 17 revealed the reasons for New Zealand’s December 2017 decision to block HNA Group’s purchase of the country’s largest non-bank lender, UDC, from ANZ Banking Group. According to the documents, New Zealand’s Overseas Investment Office found that HNA’s debt “appears to be substantially in excess of…underlying assets,” while “well-known liquidity issues” at HNA “increases the likelihood of a default event.” The OIO further added that HNA was unable to clearly explain its ownership structure and so concluded the deal should be rejected.
In recent months, HNA Group has faced criticism from Chinese authorities over its debt structure and practice of making “non-core” investments. These issues exacerbated existing scepticism in Western markets regarding the rapid international expansion of the company, including a number of high-profile acquisitions. Indeed, HNA’s rapid expansion was the main contributing factor behind its current liquidity problems. It has also recently been disclosed that HNA has had to cut as many as 100,000 jobs across its businesses. Chinese companies facing this kind of foreign and domestic pressure have struggled to rebound and re-establish themselves. HNA, however, seems to be revamping its government relations strategy, both in China and overseas, perhaps to sustain some of its earlier momentum – despite this ruling from New Zealand.
HNA’s new approach in China is indicated by its February 26 decision to set up a $3.2 billion fund to finance investment related to the Belt and Road Initiative, Xi Jinping’s signature foreign policy framework. According to reporting from the Wall Street Journal, this compliance with government policy preferences has seen government officials instruct state banks to continue lending to HNA – a fate far different from one peer, Anbang, whose chairman Xiao Jianhua is under investigation for corruption.
HNA’s April 10 hire of Israel Hernandez, a former US Commerce Department official and senior advisor to Wilbur Ross, should benefit the conglomerate’s international dealings. Mr. Hernandez, who also worked as Acting Undersecretary of Trade in 2017, will work as head of international corporate relations.