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HNA pledges 41% stake in subsidiary as collateral for loan

HNA Group Co. Ltd. unit Hong Kong International Construction Investment Management Group Co. Ltd. pledged 1,394,214,012 shares to Hong Kong-based private equity firm PAG Holdings Ltd. as collateral for a loan.

The shares pledged represent a 40.98% stake in the HNA unit, with the pledge period having commenced Feb. 14. The unit noted that it may pledge more shares as collateral to PAG if the loan-to-value ratio falls below a certain threshold.

While HNA did not disclose the loan amount and its purpose in a Feb. 20 filing, "people close to the deal" cited by the South China Morning Post in a Feb. 21 report said the pledged shares could yield between HK$1 billion to HK$1.5 billion for the Chinese conglomerate. The paper added that based on the shares' Feb. 21 closing price of HK$2.12, the pledged shares were worth roughly HK$2.96 billion.

The South China Morning Post noted that the pledged shares may be part of HNA's efforts to raise funds to trim its mounting debt. The move comes after HNA agreed to sell two Hong Kong land parcels, which Hong Kong International Construction co-owned, to developer Henderson Land Development Co. Ltd. for HK$16 billion. Aside from asset disposals, it was recently confirmed by China CITIC Bank Corp. Ltd. that it extended a 20 billion yuan credit facility to HNA.

As of Feb. 21, US$1 was equivalent to 6.34 yuan.