There are plenty of good reasons for avoiding the backslapping bonhomie of Davos. The fact that your company is facing a serious financial crisis and your travel holdings have halted training are good reasons.
The chief executive officer of HNA Group Co., the Chinese conglomerate that’s under scrutiny because of its debt-fueled acquisition spree and ballooning financing costs, has canceled plans to attend next week’s annual meeting of the World Economic Forum, people familiar with the matter said.
It wasn’t immediately clear why Adam Tan, who’s on the list of attendees for the summit to be held Jan. 23 to 26 in Davos, Switzerland, decided to pull out. The people asked not to be identified discussing a private matter and declined to provide further details. An HNA representative couldn’t immediately comment when contacted by Bloomberg News on Thursday.
HNA emerged from near obscurity over the past two years after a $40-billion-plus buying spree that included large stakes in Deutsche Bank AG and Hilton Worldwide Holdings Inc., amassing one of the world’s largest piles of debt in the process. Since then, the company has been battling scrutiny from regulators about its ownership and has faced mounting difficulties in its ability to repay its debt.
The Chinese delegation to the WEF this year will be led by President Xi Jinping’s top financial and economic adviser, Liu He. Other Chinese executives scheduled to attend the summit include Alibaba Group Holding Ltd. Chairman Jack Ma, Baidu Inc. President Zhang Yaqin and Guangzhou Automobile Group Co. Chairman Zeng Qinghong.
Separately, Tan told staff this week that the company plans to cut costs “dramatically” and urged employees to cut down on unnecessary expenses because 2018 will be HNA’s “Year of Efficiency,” according to a copy of the internal memo obtained by Bloomberg.
The four-page memo urged top managers to lead the effort and laid out four categories by which employees can help the initiative:
- Have a prudent working attitude
- Spending on conferences and events: costs should be limited to 3,000 yuan ($469) per person a day
- Travel: Avoid unnecessary trips, use video, phone and email
- Strictly control gifts for public affairs
Tan also provided 10 specific ways various departments can cut costs. Among them:
- Investment banking: work with finance department to cap fees to third parties
- Human resources: cut unnecessary staff expenses, control training costs, limit bonuses
- Social responsibility team: control spending on improving group’s image
- Innovation team: control purchases of hardware, promote HNA’s cloud usage internally
- General administration: Monthly stationery expenses will be limited to 20 yuan per person, print less, conserve water and electricity
The move comes as the conglomerate is facing rising debt pressure after it has been on debt-fueled acquisition spree to snap up trophy assets including stakes in Deutsche Bank AG and Hilton Worldwide Holdings Inc.
A representative at HNA didn’t immediately comment on the memo.
‘Major Disclosure’ COming
The group’s HNA-Caissa Travel Group unit halted its shares from trading in Shenzhen ahead of a “major” announcement, becoming the Chinese conglomerate’s fourth unit to do so since last week. The announcement may have an impact on the shares, according to a statement to the Shenzhen stock exchange on Friday.
HNA-Caissa joins Bohai Capital Holding Co., Tianjin Tianhai Investment Co. and flagship Hainan Airlines Holding Co. in suspending their stock. Tianjin Tianhai and Hainan Air have said they’ll provide updates on the situation in the coming weeks.
HNA has been facing increasing pressure — some banks are said to have frozen some unused credit lines to HNA units after they missed payments — after a debt-fueled acquisition spree that left it with global assets ranging from hotels and refrigerated trucks to aviation and car rentals.
HNA Bonds Plunge
It’s been a bad week for HNA bonds.
One of them sold by HNA Group International Co., maturing in 2019, slid as much as 4.2 cents this week — the biggest weekly fall in six months — to a record low of 84 cents on the dollar. Its bonds due 2021 shed 3.3 cents this week to 79.5 cents, also near the lowest ever.
With uncertainties lingering around the conglomerate, some subsidiaries missed payments due to several Chinese banks in recent weeks, according to people with knowledge of the matter this month.
“Its debt problems are mounting,” said Warut Promboon, managing partner at credit research firm Bondcritic Ltd. “When it rains it pours.”
Star Lawyer David Boies and Chinese Tycoon Guo Wengui Split
Guo Wengui, the controversial businessman who’s being sued by HNA and is being sought by China for making various allegations of corruption against the country’s rich and powerful, will no longer be represented by famed lawyer David Boies as part of a shakeup of his legal team in the U.S.
Boies Schiller & Flexner LLP will no longer represent Guo, said a representative at the law firm that Boies founded, confirming court filings this month. Former federal prosecutor Duncan Levin of Tucker Levin PLLC is also severing ties with Guo on three cases, according to court documents. Levin confirmed he no longer represents Guo and declined further comment. A spokeswoman for Guo declined to comment on the reason for the change.
Boies, who fought for Al Gore in the famous Bush v. Gore dispute, and more recently now-former client Harvey Weinstein, will be replaced by New Jersey-based Cohen & Howard LLP in defending Guo against a defamation case lodged by HNA. The law firm will represent Guo in three other cases, and will work with Washington-based Ward & Berry PLLC, said Aaron Mitchell, a lawyer with Cohen & Howard. The change doesn’t represent a shift in legal strategy, he said.
The reshuffle is the latest twist in Guo’s legal saga — he’s sought by Chinese authorities through Interpol and is facing around 10 lawsuits in the U.S. The dissident has also been seeking asylum in America. Guo, who frequently posts his allegations on social media, has said he’s a whistleblower motivated to change China.
©2018 Bloomberg L.P.
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Photo Credit: HNA Group's CEO Adam Tan. The company is dealing with the repercussions of its debt-fueled acquisition spree. Bloomberg
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