Bloomberg Businessweek March 9, 2020
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REUTERS; DATA: COMPILED BY BLOOMBERG
high economic growth, broke down when China
started to tighten credit amid a decelerating econ-
omy,” says Liu Feng, a Hainan Normal University
professor who studies Hainan’s economic poli-
cies. “HNA’s management was aware of the prob-
lem years ago, but the group is like a big ship—it’s
so difficult to change direction.” HNA said the gov-
ernment’s actions don’t translate to a takeover and
doesn’t involve changes in the controlling share-
holder. A representative for HNA declined to com-
ment beyond the company’s public statements.
HNA’s time at the top of China’s corporate pile
was brief. In 2017 it seemed determined to announce
its arrival on the world stage, putting on glitzy events
at the Petit Palais in Paris and Hampton Court
Palace in London. An unprecedented dealmaking
spree gave it a quarter of hotelier Hilton Worldwide
Holdings Inc., 10% of Deutsche Bank, and a vast
array of high-end real estate, including a Park
Avenue tower that cost it an eye-popping $2.2 billion.
Serious problems were mounting even then. In
April of that year, Guo Wengui, a wealthy Chinese
businessman who lives in New York, alleged that
HNA was connected financially to the families of
top Communist Party officials, a public airing of
rumors that had circulated for years in financial cir-
cles and contributed to decisions by some invest-
ment banks to avoid doing business with HNA.
HNA denied Guo’s claims and sued him for def-
amation, but it struggled to present a convincing
alternative account of its ownership structure. Its
largest listed shareholder, Guan Jun, controlled a
stake worth as much as $18 billion but was a virtual
ghost, almost never seen in public. When Bloomberg
News reporters visited addresses associated with
Guan in Beijing and Hong Kong, the office of a com-
pany he was listed as controlling was empty and
locked, while an apartment he had given as his
address was occupied by someone else.
Aware that questions about its ownership were
becoming an obstacle to expansion, HNA made
what it described as a complete disclosure. Guan,
Chief Executive Officer Adam Tan told the Financial
Times, had just “held the stake for us” before trans-
ferring it to an HNA-affiliated foundation. The
casual admission that a putatively major share-
holder was being used as a straw man arguably
raised more questions about HNA than it answered,
as did the company’s statement that, from then on,
it would be controlled primarily by two previously
unknown charities. Unsurprisingly, HNA increas-
ingly found its attempts to acquire companies
abroad stymied, in particular by the Committee
on Foreign Investment in the United States, which
often scrutinizes takeovers of U.S. companies by
$30b
15 b
0 b
▼ Market value of
HNA Group’s publicly
traded holdings
Q1 ’15 Q1 ’
◀ Disinfecting a Hainan
Airlines flight
inally
Killed a High Roller
before the virus emerged in central China late last
year. From the earliest days of HNA’s expansion,
Chen and other top executives sought to collect a
seemingly random array of trophy assets around the
world with competing mandates and vastly different
challenges. The purchases ranged from blue-chip
Manhattan real estate to an airport ground-handling
company, a computer distributor, and even a hedge
fund. HNA, which Chen started as an airline, would
do all this by amassing one of the largest debt loads
in the world—about $86 billion at the end of 2017—
and spending more on interest that year than any
other nonfinancial company in Asia. Perhaps most
audaciously, it acquired these assets—which included
major stakes in companies such as Deutsche Bank
AG, the most important lender in Europe’s largest
economy—without disclosing much about HNA’s
finances or the identities of its ultimate owners.
“Its aggressive expansion style with high debt lev-
els, which ... benefited from China’s decades-long
