Chinese state may bail out Avolon’s main shareholder

Irish lessor agrees to borrow €575m through bonds

The government of the southern province of Hainan, where HNA is based, is reportedly in talks to take control of the group and sell off its airline interests. Photograph: iStock

The government of the southern province of Hainan, where HNA is based, is reportedly in talks to take control of the group and sell off its airline interests. Photograph: iStock

 

The Chinese state may bail out debt-laden HNA, the majority shareholder in Irish aircraft lessor, Avolon’s biggest backer.

The news emerged as Avolon announced it was borrowing €575 million through bonds issued by subsidiaries.

Avolon said on Thursday it was raising $620 million (€575 million) in three separate bond issues through two companies, Sapphire Aviation Finance LLC and Sapphire Aviation Finance Ltd, set up for the purpose.

The bonds must be repaid in 2040 and have interest rates varying from 3.228 per cent to 6.779 per cent.

They are secured on 21 aircraft valued at a total of $746.8 million and leased to 19 airlines around the world.

Avolon chief executive Dómhnal Slattery said investors’ demand for the bonds reflected the company’s standing in the capital markets.

Meanwhile, reports yesterday said China planned take over HNA, whose efforts to repay creditors $100 billion have run into trouble following the coronavirus outbreak.

Shares in Avolon’s biggest backer, Bohai Leasing, which is 52 per cent-owned by HNA, closed almost 6 per cent up at 3.58 Chinese yen on the Hong Kong stock exchange following the news.

Bohai Leasing owns 70 per cent of Avolon, whose other shareholder is New York- and Tokyo-listed Orix Corporation.

Buying spree

HNA ran up its debt through a buying spree during which it snapped up shares in Deutsche Bank and hotel chain, Hilton, along with properties in New York and San Francisco.

The government of the southern province of Hainan, where HNA is based, is in talks to take control of the group and sell off its airline interests, the reports said.

HNA controls or holds stakes in a number of domestic carriers including the flagship, Hainan Airlines, which operated a Dublin-Beijing service for several months last year.

Reports citing sources close to the talks said most of HNA’s airline shares would be sold to China’s three top carriers: Air China, China Southern Airlines and China Eastern Airlines. – Additional reporting: Bloomberg, Reuters