Pacific Alliance Group (PAG), a Hong Kong-based private equity firm, has made a private loan to one of the subsidiaries of HNA Group, a Hainan-headquartered Chinese conglomerate, according to an HKEX filing released on February 20.
The filing shows that PAG made a loan worth an undisclosed amount to HNA Finance which pledged HK$3.1 billion ($396 million; €322.1 million) worth of its shares in Hong Kong International Construction Investment Management Group (HKICIM), an HNA Group subsidiary.
A spokesperson from PAG confirmed the report with Private Debt Investor on February 22 on the pledge of HK$3.1 billion ($396 million) or 41 percent in HKICIM shares as loan collateral but declined to comment further on the loan amount.
If the loan is not repaid, PAG can take over the pledged shares or the collateral, according to the filing.
In addition, if the loan-to-value ratio falls below an undisclosed threshold, PAG can take a long position in the shares up to 81.95 percent of the underlying shares of HKICIM, depending on the fluctuations of its share price.
HKICIM is a Hong Kong-listed property development and investment firm, previously known as Tysan Holdings Limited, according to the firm’s public disclosure.
HNA Group is a majority shareholder of HKICIM, according to S&P Capital IQ’s report on HNA’s corporate structure.
Among other investors in HKICIM, China Construction Bank Corporation’s asset management arm holds 10.7 percent, China Railway Construction Corporation (CRCC) Hong Kong Development Limited owns 5.1 percent and Air Canada Pension Master Trust Fund has 8.4 percent of HKICIM shares, according to the report.
PAG declined to comment further on HNA Group’s private credit lines.
HNA Group’s spokesperson could not be reached for comments by publication time.
HNA Group announced on 9 February 2018 that the firm had made interest payments of $9 million on its $300 million 6 percent bonds due 2019. The interest was scheduled to be paid on 20 February 2018.
However, HNA’s liquidity status is reportedly concerning. Earlier this month, the group trimmed its shareholding in Deutsche Bank to 8.8 percent from 9.9 percent.
Its credit rating agency, Standard & Poor’s also downgraded HNA Group’s rating by a notch to ‘BB’ from ‘B+’ in November, as reported.