HNA Group: TRICK or TREAT
HNA Group Ltd. (HNAGRZ CH) (HNA)’s SANYPH 11/18s will mature on November 6 (next Tuesday) and we believe there is a likelihood that HNA will repay the bonds, based on the group’s credit facilities, on-going asset sales, and additional new debt the group has raised so far since July.
We note that it will be difficult to buy SANYPH 11/18s since the maturity date is already next week. Our liquidity analysis puts more confidence in HNA’s cashflow until the end of June 2019 and we revise our recommendation on SANYPH 11/18s, SANYPH 12/18s, and HONAIR 1/19s to a tactical OVERWEIGHT (from Underweight). We are less confident in GRCHAR 3/19s as the bonds do not represent HNA’s reputation as much, in our view.
Over the longer term, we do not believe that the group's financial situation is sustainable. The group’s liquidity situation remains tight and deteriorating reputation (from negative headlines) has hit the group’s profitability. As such, we maintain our UNDERWEIGHT recommendation on GRCHAR 3/19s, SANYPH 8/19s, SANYPH 10/20s, and HONAIR Perp.