(Yicai Global) Sept. 20 -- Chinese conglomerate HNA Group Co. recently pledged equity in its Hong Kong-listed subsidiaries to obtain financing, and the move has aroused concerns among investors, Caixin reported today.
China Huarong Asset Management Co. [HK:2799] has filed respective shareholdings of 65.2 percent and 74.96 percent in Jia Yao Holdings Ltd. [HK:1626] and KTL International Holdings Group Ltd. [HKG:0442], which are both subsidiaries controlled by HNA Group, per data released yesterday by Hong Kong Exchanges and Clearing Ltd. The equity ratios and share numbers equal those held by HNA Group, meaning that it has pledged its stakes in the two subsidiaries to Huarong,
China Huarong disclosed its equity interests in the two firms as "guaranteed interest in shares held" without specifying the share prices.
The combined market cap of Jia Yao and KTL International stood at USD179 million (HKD1.4 billion) as of market close yesterday, indicating that HNA Group's equity pledge is worth about USD128 million (HKD1 billion). The loan that HNA Group obtained with the equity pledge is likely significantly less than that amount as companies typically offer relatively large discounts for pledges of equity in small-cap firms.
Jia Yao said on Sunday that it planned to raise USD15.38 million (HKD120 million) via a convertible bond placement.
The Hainan-based conglomerate previously bought four expensive land parcels in Kai Tak, Hong Kong, through its subsidiaries. The deals sparked a refinancing crisis within the company, local media reported. The China Banking Regulatory Commission ordered banks to probe credit risks associated with the firm in June, fueling speculation about its financial status.