On April 18, according to the website of the Hong Kong Judiciary, HNA Group (International) Co., Ltd. was wound up by creditor Golden Morning Hong Kong Ltd., and the Hong Kong High Court will hear it on July 3, 2024. According to the company registration records, Golden Morning is a private company incorporated on February 5, 2024.
It is understood that HNA Group (International) issued two non-public bonds in 2016, totaling 5 billion, and the guarantor was HNA Group. On January 22, 2024, the Shanghai Stock Exchange issued an announcement to publicly reprimand HNA Group (International) for failing to disclose the 2022 annual report on time for one of the above-mentioned bonds, and for failing to disclose it regularly many times since 2020.
Recently, Caesars Tourism also took HNA Group to court for a 300 million yuan catering debt. In November 2023, the China Securities Regulatory Commission (CSRC) issued an administrative penalty decision that revealed all the secrets of China's largest bankruptcy case.
China Securities Regulatory Commission: Hundreds of billions of funds of listed companies are illegally occupied
According to the CSRC's penalty letter, HNA Group's violations of the law mainly lie in organizing and instructing nine of its subsidiaries to fail to disclose non-operating related party transactions in accordance with regulations, and organizing and instructing six of its subsidiaries to fail to disclose related party guarantees in accordance with regulations, resulting in the illegal appropriation of funds of many listed companies.
During the period from 2018 to 2020, according to the requirements of HNA Group, 9 companies, including HNA Holdings, HNA Foundation, Haiyue Energy, Supply and Marketing Daji, HNA Investment, Shouhang Zhiheli, HNA Cold Chain, Yihang Technology, and Hainan Xinsheng, carried out non-operating related party transactions.
As of June 30, 2018, the balance of funds occupied by related parties of the above-mentioned companies was 8.285 billion yuan, the balance of occupied funds was 15.744 billion yuan on December 31, 2018, the balance of occupied funds was 19.426 billion yuan on June 30, 2019, the balance of occupied funds was 27.072 billion yuan on December 31, 2019, and the balance of occupied funds on June 30, 2020 was 55.012 billion yuan. After July 1, 2020, non-operating related party transactions occurred 31.457 billion yuan.
The penalty letter pointed out that the above-mentioned related party transactions occurred under the requirements and arrangements of HNA Group, and none of them had commercial substance, constituting capital occupation, and the relevant companies failed to disclose the above-mentioned transactions in a timely manner in their financial reports.
In addition, during the period from 2018 to 2020, according to the requirements of HNA Group, six companies, including HNA Holdings, HNA Foundation, Supply and Marketing Daji, HNA Investment, Shouhang Helicopter, and Yihang Technology, provided guarantees for their related parties.
According to a separate case, the above-mentioned companies had a balance of 58.960 billion yuan as of June 30, 2018, a balance of 64.990 billion yuan on December 31, 2018, a balance of 64.604 billion yuan on June 30, 2019, a balance of 61.415 billion yuan on December 31, 2019, a balance of 56.146 billion yuan on June 30, 2020, and a balance of 2.700 billion yuan after July 1, 2020.
In the end, the CSRC imposed a total fine of 6 million yuan on Chen Fengnian, Tan Xiangdong fined 5 million yuan, and Chen Xiaofeng fined 3 million yuan; Bao Qiqi, He Jiafu, and Du Liang were each fined 1.5 million yuan, Zhang Ling was fined 250,000 yuan, and HNA Group was fined a total of 7 million yuan.
In September 2021, Chen Feng, former chairman of HNA Group, and Tan Xiangdong, CEO of HNA Group, were taken compulsory measures in accordance with the law on suspicion of violating the law and committing crimes. However, as of 2024, the legal representative of HNA Group is still Chen Feng.
HNA Group became the largest bankruptcy case since the founding of the People's Republic of China, and on April 24, 2022, its risk disposal work was successfully completed. Who caused the trillion-dollar bankruptcy of HNA, what are the highlights of HNA's bankruptcy reorganization plan, and why did it become a benchmark? This article will review the whole process in full.
airlines without airplanes,
But it can quickly become one of China's "Big Four"
The most direct reason for HNA's thunderstorm is, of course, from the crit of the epidemic, and there are no eggs under the nest. According to the disclosed data, Hainan Airlines is expected to lose more than 58 billion yuan, Air China is expected to lose 13.5 billion yuan, China Southern Airlines is expected to lose 8 billion yuan, China Eastern Airlines is expected to lose more than 9.8 billion yuan, and Boeing is expected to lose at least 11.9 billion US dollars.
But in addition to "natural disasters", the most fundamental is "man-made disasters". Without the epidemic, HNA would have died a little later at best. Since 2018, HNA has been in liquidity difficulties, followed by operational difficulties, and after it could not hold on, it took the initiative to ask the local government to intervene. However, after dealing with more than 300 billion yuan of assets in a year, HNA still has more than 700 billion yuan of debt, and is known as "the most debted enterprise in Asia". In 2019, HNA ranked second only to Huawei in the top 500 private enterprises in China with a revenue of more than 600 billion yuan.
The establishment and growth of HNA resonates with the development of Hainan Province. In 1988, the Hainan Special Economic Zone was established, "if you want to get rich, you must first build roads". To develop Hainan, the 80-kilometer Qiongzhou Strait is an insurmountable moat, so the development of the aviation industry is imminent. At this time, Liu Jianfeng, then governor of Hainan Province, found Chen Feng. At that time, Chen Feng had graduated from the Lufthansa Air Transport Management School in Germany, first worked in the air traffic control bureau, and then jumped to the China Agricultural Trust and Investment Corporation.
It is said that there was such a conversation between the two at that time-
Chen Feng asked: How much money are you willing to spend to run an airline?
Governor Liu held out a finger.
Chen Feng: 100 million? A Boeing passenger plane is at least 300 million!
Governor Liu shook his head: It's not 100 million, it's 10 million.
You must know that Hainan's fiscal revenue was less than 700 million yuan in those years, and it was not as good as Guangdong, a developed city, so how could it afford 300 million yuan to buy an airplane? 10 million yuan was not enough to buy a wing! Under such circumstances, Chen Feng went into battle with a hard head, and in 1990 China gave birth to an airline that did not have airplanes, "because of lack of money, it could only rent one of the floors of a three-story building in a remote place." There was a musty smell from the building, and the pigsty was opposite. ”
If you don't have enough money, you can borrow money to make up for it. Chen Feng racked his brains and came up with a good way to "get alive"-
With the business license given by the government, he lobbied the bank and took a loan of 400 million yuan from the bank; he also found many people in the society and raised 250 million yuan in financing through "private crowdfunding", and finally won the first plane in Hainan Province. With this plane, Chen Feng used this mortgage to buy a second and third planes...... In this way, the same aircraft was recycled, wool was collected back and forth, and production was constantly expanded. Later, Chen Feng found the American Wall Street giant Soros, probably a fellow believer of the "White Wolf with Empty Gloves", and Soros also thought so, and immediately gave HNA $25 million.
It's hard to go from zero to one, but it's easy to go from one to N. With the endorsement of Hainan ZF and the role of Soros's weather vane, Hainan Airlines has made great progress, successively acquiring Chang'an Airlines, Xinhua Airlines and Shanxi Airlines, and buying Sanya Phoenix Airport, Three Gorges Airport and Manzhouli Xijiao Airport......
HNA, which once couldn't afford to buy a single wing, was officially ranked among the "Big Four" of China's airlines (the others are all state-owned) until 2012, staging the myth of "assets increased by 36,000 times in 20 years since its founding".
Blindfolded diversification expansion
If at the beginning, HNA's "empty glove white wolf" was forced to make a living, then later it was purely driven by desire. HNA, which has tasted the sweetness of capital, is out of control.
In 2003, Chen Feng put forward the strategy of "one main and two wings": while expanding the main business of air transport, vigorously develop the hotel, tourism and financial business related to the main business. Since then, HNA has embarked on a frantic "buy, buy, buy" mode. In terms of "two wings", HNA first established Daxinhua Logistics Company, invested in and acquired more than a dozen upstream and downstream enterprises, and later built a chain supermarket kingdom, including Shanghai Jiadeli Supermarket, Tianjin International Shopping Mall, Hunan Jiarunduo, Baole Commercial and Nantong Beyond Supermarket, and officially founded HNA Capital in 2007, and in the same year, real estate was listed as the highlight of enterprise development.
Even in 2008, when the financial crisis swept the world and the aviation industry shrank one after another, HNA took the initiative and threw out the "Super X Plan" - in 2020, HNA Group's operating income will reach 8000-10000 billion yuan, entering the "world's top 100", and in 2030, its operating income will reach 1.5 trillion yuan, entering the "world's top 50". In addition, HNA has established eight business segments: aviation, tourism, commerce, logistics, industry, airports, real estate, and hotels. In Chen Feng's words, except for condoms, everything else that HNA can do is basically done.
In 2009, there were fewer than 200 companies under HNA Group, and at the beginning of 2011, there were nearly 600 companies. In 2 years, the number of companies has tripled! But there is no craziest, only crazier, and in 2017, when the liquidity crisis broke out, HNA's madness reached a new level.
In the same year, HNA acquired 245 Park Avenue in Manhattan for US$2.21 billion, continued to increase its stake in Deutsche Bank, rising to 9.92% in May, becoming the largest shareholder of Deutsche Bank, US$2 billion in Value Partners Group in Hong Kong, US$775 million in Glencore's 51% stake in oil storage and logistics business, and S$1.399 billion (6.872 billion yuan) in Singapore's logistics company CWT. In 2016 and 2017, HNA Group's net investment was as high as 560 billion yuan!
You must know that the total cost of the 1,300-kilometer-long Beijing-Shanghai high-speed railway is only a little more than 220 billion yuan, and HNA is equivalent to building 2.6 Beijing-Shanghai high-speed railways in two years!
From the perspective of total assets, HNA's expansion rate is even more staggering, according to Wind data, in mid-2016, HNA Group's total assets soared to 542.8 billion yuan, and by the end of 2017, its total assets soared to 1,231.9 billion yuan. In 20 years, HNA's assets have grown from 10 million to more than 1 trillion yuan, an increase of 100,000 times!
Lewis Platt, the fourth CEO of Hewlett-Packard, summed up 300 failed companies in the United States and came to one conclusion: none of these companies starved to death, but survived. The diversification of HNA is even more terrifying than that of LeTV Laojia, but the interlacing is like a mountain, and the core competencies of the industry are very different, how can a company handle such a big stall at the same time?
What's more, while the company is galloping, debts continue to accumulate. According to media reports, from 2015 to 2017, HNA Group added a large amount of new debt every year, with a total of about 366.8 billion yuan of new interest-bearing debt in three years. By 2018, HNA's debt ratio reached 70.55%, with a total debt scale of 750 billion yuan.
In 2019, Chen Feng finally woke up and said something like this: "When you think you can do anything and do anything, disaster is buried." Unfortunately, he understood too late.
The highest level of empty gloves white wolf
Marx said more than 180 years ago: "The capitalists are afraid of no profit or too little profit, just as nature is afraid of a vacuum." As soon as there is a proper profit, capital is bold...... With 50 percent of the profits, it will take risks; for the sake of 100 percent of the profits, it will dare to trample on all human laws; and with 300 percent of the profits, it will dare to commit any crime and even risk being hanged. ”
On the surface, HNA is carrying out diversified expansion by staking and running blindfolded, but what is more dangerous behind this is the capital operation of radical operation and brutal plunder.
First of all, with so many fields and such a big spending, where does HNA's money come from?
Many years ago, Wang Jianlin once said that the highest level of business management is "karate", but this karate is not a liar, it has a brand, with the ability, others come to the door, you can make money without a penny of brand. Obviously, HNA has interpreted Lao Wang's "karate" to the extreme, realizing the miraculous from 0 to 1 and from 1 to N. With Chen Feng's ability to talk about the lotus, he was able to persuade the bank to give it 400 million yuan without a single plane back then, not to mention that it has now accumulated such a huge scale, government support, and preferential loans........ Money doesn't come too easily.
In addition, HNA has also further exerted the power of "private crowdfunding" and played P2P - founded three wholly-owned platforms of HNA Group, namely Taurus, Jubaohui and Qianhai Aviation Exchange, and participated in Lima Wealth Management, Huiren Loan, Tongban Street, Kumquat Wealth, Niuniu Bank, Phoenix Finance, Financial Circle, Micro Finance Exchange, etc., and made money in an all-round way. "The issuance of targets exceeds the limit", "self-financing", "lack of qualifications to raise funds from the public" and other chaos have emerged.
Maybe it's because the money from empty gloves is not distressed, and HNA's large-scale investment is as rash as throwing money.
According to industry insiders, HNA's multi-billion dollar investment projects have no more than a month of due diligence. For example, in the three months of 2015, HNA completed five blockbuster transactions in Europe in succession, and the longest due diligence period for acquisition projects amounting to 10 billion yuan was only 25 days.
In 2020, HNA Group filed for bankruptcy reorganization of 63 of its enterprises, becoming the largest bankruptcy reorganization case in the history of New China. Banks, bondholders, suppliers, employees, etc., there are as many as 430,000 shareholders and creditors alone.
The shareholding structure is like the Qingming Shanghe diagram
A single appointment can mobilize all the company's funds at will
Before the Joint Working Group arrived, no one knew the true base of assets and liabilities of the vast and intricate HNA system. Since its entry on February 29, 2020, an important task of the joint working group has been to conduct a thorough investigation, spending several months to verify the assets, liabilities and related transactions of HNA Group and its more than 2,000 enterprises one by one, and clarifying the asset base, management structure, equity relationship and creditor's rights relationship of the entire group.
Ren Qinghua, deputy head of the joint working group, sent Gu Gang a new complete version of the treemap of the equity relations of several listed companies and group companies, each of which was nearly three meters long. She said: "Team leader, look at the Qingming Riverside map." ”
An insider of HNA told the reporter of China Economic Weekly, "This is the first time in the history of HNA to find out the asset base, management structure, equity relationship and debt relationship of the entire group." "The result of the investigation was severe insolvency. "The gap between assets and liabilities is huge, and it is no longer a problem that can be solved by selling assets. According to a source in the working group.
Perhaps the most unexpected thing for the joint working group was the illegal appropriation of the funds of the three listed companies.
The three listed companies, HNA Foundation, HNA Holdings, and Supply and Marketing Daji, have all issued the "Announcement on the Special Self-inspection Report on the Governance of Listed Companies", which discloses in detail the occupation of non-operating funds and undisclosed guarantees by major shareholders and related parties.
HNA Holdings alone has 37.5 billion yuan of funds occupied, of which 9.6 billion yuan has been borrowed by related parties, 13.87 billion yuan has been actually used by related parties, 8.67 billion yuan has been deducted from the funds formed by providing guarantees for related parties, 5.08 billion yuan has been collected by related parties, and 820 million yuan has been helped by major shareholders to redeem employee wealth management; 13.7 billion yuan of final funds for wealth management products purchased by Daji subsidiaries have been borrowed by the controlling shareholders or their related parties, and 5.3 billion yuan have been deducted due to the guarantee provided by the subsidiaries to the controlling shareholders or their related parties; and 5.57 billion yuan have been occupied by non-operating funds of related parties.
Historically, there has been a strict hierarchy within the HNA Group, and at the same time a high degree of centralization. According to an analysis by a HNA insider, the highly centralized management has led to the opacity of the flow of assets, and although each company is an independent entity, it is impossible to maintain independence in management. "This ultimately led to a huge appropriation of the listed company's funds by major shareholders.
Gu Gang said in an internal letter: "When I hold a regular meeting every week, I think of the hardships of this week's work, the big pits to be dealt with under the barbaric growth in the past, the roughness of many of our past decisions, and the study of assets that have been destroyed by others using commercial terms, I will be full of anger and dissatisfaction, how did such a good group get to where it is today?" This may also be the question and regret of many people.
Hainan Airlines is divided into four
Trillions of debts of 321 companies are concentrated in trusts
HNA Group finally confirmed the debt of 1.1 trillion yuan. After the reorganization, HNA will be split into four sectors to operate independently, each of which will return to its main business and develop healthily. If the bankruptcy reorganization is successfully completed, HNA will split the reorganization into four completely independent operating sectors – aviation, airports, finance, commerce and others.
Aviation sector: HNA Holdings-based sector, the controlling shareholder is Fangda Group.
Airport sector: The sector is dominated by the foundation of HNA, and the controlling shareholder is Hainan State-owned Enterprise Haifa Holdings.
Financial sector: Bohai Leasing-based sector.
Commercial and other sectors: the sector dominated by supply and marketing.
Among the four reorganization cases of HNA Group, the merger and reorganization case involved the largest number of enterprise entities, the largest number of creditor's rights, and the most complex reorganization plan arrangement, mainly through the trust plan to achieve asset management and debt repayment.
The above 321 companies are involved in air transportation, airport operation, shipbuilding, financial services, hotel business, real estate development, tourism services, corporate management and other businesses. Among them, there are 60 air transport enterprises, 45 airport operation enterprises, 8 shipbuilding enterprises, 44 financial service enterprises, 48 hotel commercial enterprises, and 116 other enterprises. As of February 10, 2021, the total assets of 321 companies after consolidation and offsetting were 253.2 billion yuan, total liabilities were 1,039 billion yuan, and net assets were -785.8 billion yuan, which was seriously insolvent.
The most distinctive feature of the reorganization plan of 321 companies, including HNA Group Co., Ltd., is the establishment of trusts to settle debts, which is also the place where the reorganization plan best reflects its professional capabilities.
Specifically, the above-mentioned promoter acts as the settlor to establish a trust plan, and injects the equity of the total shareholding platform and the receivables claims of each business segment into the trust plan as trust property. After the establishment of the trust, the trust plan realizes the actual control and management of all the underlying assets of the trust through the total shareholding platform, that is, all the assets of 321 companies are included in the trust plan.
Except for a small part of the cash settlement and the repayment of retained debts, in principle, all the debts of the 321 companies are collected to the promoters and repaid with the shares of the trust plan established by the promoters, and the secured creditors with property obtain the preferred share, and ordinary creditors obtain the ordinary share. After the creditor becomes the beneficiary of the trust, he or she enjoys the overall property interests of the 321 companies and can share the operating and disposal proceeds of the related enterprises after the reorganization.
The assets of the main aviation sector and the airport sector will no longer be the underlying assets that can be controlled by the trust plan when the investment party is introduced, and the secured creditors of these two sectors cannot enjoy the preferential share of the trust accordingly.
How to manage the trust plan has become one of the key contents of the reorganization plan of 321 companies including HNA Group Co., Ltd. According to HNA's reorganization plan, in addition to *ST HNA, *ST Foundation and *ST Daji, the remaining 321 company assets of HNA Group have been included in the trust plan, and the trust is also an important carrier for subsequent debt repayment.
The above-mentioned companies all said in the announcement that the actual controller of the company was changed from Hainan Cihang Public Welfare Foundation to no actual controller, but according to the reporter's understanding, all the beneficiaries of the trust are the actual controlling shareholders of the above-mentioned listed companies after the equity penetration.
How do these companies work after a change of ownership trust scheme?
First of all, the supreme authority of the trust is the general meeting of beneficiaries composed of all the creditors of the trust shares, which has the right to decide all major matters of the trust, and the number of beneficiaries is expected to be about 20,000, mainly financial institutions. Resolutions shall be adopted by a majority or two-thirds of the voting shares present.
Secondly, the General Meeting of Beneficiaries has a Management Committee, which administers the affairs of the Trust in accordance with the resolutions and authorizations of the General Meeting of Beneficiaries, and consists of 19 members, including 18 representatives of creditors and 1 representative of debtors, and the members must be elected and appointed by the General Meeting of Shareholders. Resolutions can only be made at a meeting of the Management Committee by a majority or two-thirds of all members, and no member can control the resolutions made by the Management Committee or exert significant influence.
In addition, the consortium formed by CITIC Trust and Everbright Xinglong Trust is the trustee of the trust, which is mainly responsible for opening and maintaining trust collection accounts and trust accounts, handling trust-related registration procedures, being responsible for the information and data entry and maintenance of beneficiaries, daily contact, answering questions on the special line, collecting and reviewing trust share transfer materials and system entry, and developing and maintaining trust-related information systems and other affairs management work, and does not have the right to make active decisions.