The share prices of the subsidiaries of embattled Chinese conglomerate HNA Group surged on Monday after the government confirmed that it will be stepping in to help manage its liquidity. China announced that it has formed a new government task force to help the company reduce its liquidity risks.
HNA Group revealed over the weekend that a number of government agencies have formed a special task force to support its operations. The group included representatives from the Hainan provincial government, the China Development Bank, and the country's civil aviation administration.
The company, which had a standing debt of around $75 billion as of June last year, was previously speculated to be taken over by Chinese regulators. The recent announcement effectively puts an end to those speculations. According to a filing with the Hong Kong Stock Exchange on Sunday by one of the company's subsidiaries, HNA Group will still retain its management team. Instead of being fully taken over, the company will be allowed to work together with the task force to reduce its risks.
Following the announcement, shares of HNA Group's subsidiaries surged in the mainland and in Hong Kong. On Monday, Hainan Airlines' shares surged by 2.3 percent to 1.82 yuan per share. HNA Technology Investments Holdings saw its H shares surge by around 20 percent in Hong Kong to HK$54 cents per share. Another HNA Group unit, HNA Technology, had surged by 5.8 percent to 3.08 yuan following the news.
Market analysts have pointed out than the news of the government stepping in to provide support has been seen as a positive forward step in allowing HNA Group to potentially recover from its current predicament. However, even with government assistance, some investors are still closely looking at the company's operations and performance to determine whether or not it would need major restructuring to survive.
Since 2017, the company had been facing massive liquidity issues as it struggled to keep its bottom line in the green. The recent viral the epidemic has also managed to exacerbate the problem as profits from its the airline, a key asset for the company, was heavily affected.
With government assistance in the form of the special task force, the company could acquire the financial support it needs. This will include possible refinancing plans and rental payment relief as it struggles to handle its growing liquidity issues.
Reports citing sources close the matter have claimed that the task force will likely be forced to divest some of the company's assets, mainly its equity stakes and noncore assets, to allow the company to reduce its risks. The same sources claimed that Hainan Airlines will likely be split up, with different parts merged with existing state-owned carriers.
