“13 HNA Bonds” is a 3A-level publicly-raised corporate bonds. The issuer is HNA Group, the maturity date is April 15, 2020, the issue size is 1.15 billion yuan, and the balance after repurchase is 390 million yuan.
According to the 21st Century Business Herald, on April 14th, HNA Group ’s Planning and Finance Department notified investors by phone and email after work at 6:30 pm that they would request a temporary after half an hour The content of the meeting was “Notice on Convening the First Bond Holder Meeting in 2020 for HNA Group Co., Ltd. Bonds in 2013”. In the event that many investors were unable to participate in a timely manner, HNA Group forcibly convened an off-site meeting of bondholders to force a resolution to postpone the bond redemption for one year.
The capital market has responded violently to this, and it is generally believed that this is a violation and contempt of the basic rules of the capital market and related regulations. Although the chaos only occurred at the level of individual companies in corporate bonds, the adverse effects and risks brought by it were far-reaching. Mainly:
The capital market has responded violently to this, and it is generally believed that this is a violation and contempt of the basic rules of the capital market and related regulations. Although the chaos only occurred at the level of individual companies in corporate bonds, the adverse effects and risks brought by it were far-reaching. Mainly:
1. Influencing the market ’s risk assessment of corporate bonds reviewed by the National Development and Reform Commission, increasing overall financing costs. For a long time, the capital market has favored corporate bonds mainly based on urban investment bonds, giving preferential interest rates relative to their fundamentals, because even if some corporate bonds have default risks, the National Development and Reform Commission and local governments It is also possible to coordinate and settle the payment as far as the rules allow.
The National Development and Reform Commission arranges for the annual supervision and inspection of the duration of corporate bonds and the investigation of the risk of principal and interest redemption. For corporate bonds that have debt repayment risk, it is required to advance work with all parties to formulate a response plan in accordance with the marketization and rule of law method to promptly dissolve the risks; After the disposal of corporate bonds, it is emphasized to actively promote the risk disposal of corporate bonds and maintain the legal rights and interests of bondholders .
Currently, corporate bond issuance is in the process of changing from approval system to registration system. Under the registration system, the spirit of rule of law and the protection of creditors are more important. During the forced extension of the “13 HNA Bonds”, the spirit of “marketization and rule of law” could not be reflected, and the legal rights and interests of bondholders were not protected. If all bonds with debt service risk can refer to HNA’s handling method, there is no risk of default. Therefore, the chaos of “13 HNA Bonds” may cause the market to have a negative impact on the risk assessment of corporate bonds reviewed by the National Development and Reform Commission, which in turn will lead to the overall financing of corporate bonds.Increased capital costs .
2. Weaken financial institutions’ trust in HNA Group ’s legal compliance and debt resolution. As of the end of June 2019, HNA Group ’s total assets are about 980 billion yuan, and its total liabilities are about 700 billion yuan, of which current liabilities exceed 300 billion yuan, and the pressure for debt repayment is greater. On February 29, HNA Group issued an announcement saying that due to the superimposed impact of the “new coronary pneumonia” epidemic in early 2020, the company’s liquidity risk has increased since the end of 2017. In order to effectively mitigate risks, the Hainan Provincial Government took the lead in setting up a joint working group, which will fully assist and fully promote the risk disposal work of HNA Group, showing the market’s active willingness to provide support.
2. Weaken financial institutions’ trust in HNA Group ’s legal compliance and debt resolution. As of the end of June 2019, HNA Group ’s total assets are about 980 billion yuan, and its total liabilities are about 700 billion yuan, of which current liabilities exceed 300 billion yuan, and the pressure for debt repayment is greater. On February 29, HNA Group issued an announcement saying that due to the superimposed impact of the “new coronary pneumonia” epidemic in early 2020, the company’s liquidity risk has increased since the end of 2017. In order to effectively mitigate risks, the Hainan Provincial Government took the lead in setting up a joint working group, which will fully assist and fully promote the risk disposal work of HNA Group, showing the market’s active willingness to provide support.
However, the HNA Group ’s problems not only involve hundreds of billions of outstanding liabilities in the short term, but also need to stabilize social confidence and help to divest inefficient assets Can revitalize its high-quality assets. Although HNA has maintained a “zero default” record in the public bond market since the outbreak of liquidity risk, the price of “15 HNA Bonds” plunged by about 26% to 29.10 yuan on April 15th, which shows that the market has weakened its confidence. The “13 HNA Debt” forced extension event undoubtedly reduces the trust of financial institutions in the legal compliance of HNA Group’s debt disposal, which is not conducive to boosting the confidence of the society and the market in resolving the crisis .
3. Inadequate creditor protection has led to a reduction in the allocation of foreign capital to China ’s bond market. In the low interest rate environment where the epidemic has resulted in abundant liquidity in the international financial market, the higher interest rate in China ’s bond market has attracted foreign investors to continuously increase their holdings. According to data from ChinaBond, at the end of March this year, foreign capital has increased China’s bonds for 16 consecutive months, and the amount of foreign bond holdings is about 1.96 trillion yuan; the cumulative increase in foreign capital in the first quarter was 80.8 billion yuan, nearly ten times the same period last year. .
3. Inadequate creditor protection has led to a reduction in the allocation of foreign capital to China ’s bond market. In the low interest rate environment where the epidemic has resulted in abundant liquidity in the international financial market, the higher interest rate in China ’s bond market has attracted foreign investors to continuously increase their holdings. According to data from ChinaBond, at the end of March this year, foreign capital has increased China’s bonds for 16 consecutive months, and the amount of foreign bond holdings is about 1.96 trillion yuan; the cumulative increase in foreign capital in the first quarter was 80.8 billion yuan, nearly ten times the same period last year. .
At present, it is an excellent window for China to attract foreign investment to allocate RMB assets, which is conducive to the in-depth advancement of RMB internationalization. However, the forced extension of the “13 HNA Debt” shows that China ’s current system has weak protection for creditors, and it is difficult to prevent debtors from arbitrarily acting. It will undoubtedly increase the risk assessment of foreign capital ’s return on RMB assets, which may reduce the allocation of foreign capital to the Chinese bond market Willingness .
For these adverse effects and risks, I make the following suggestions:
1. It is recommended that relevant regulatory agencies actively intervene as soon as possible to carry out investigation and evaluation.
For these adverse effects and risks, I make the following suggestions:
1. It is recommended that relevant regulatory agencies actively intervene as soon as possible to carry out investigation and evaluation.
Although the HNA Group issued an open letter in the early hours of April 15, they apologized for the hasty meeting. However, whether the incident has flaws in laws and regulations, and whether its resolutions are legally effective, there is still considerable controversy in the market.
It is recommended that the National Development and Reform Commission, as the audit unit for corporate bonds, publicly express its position as soon as possible, and actively intervene in the forced extension of the “13 HNA Bond” event, which is of great concern to the capital market. To investigate and evaluate the legal compliance of the company. At the same time, it is recommended that the Shanghai Stock Exchange involved in bond transactions should also issue a regulatory concern letter as soon as possible, requesting HNA Group to formally clarify and respond to this incident.
If there are loopholes in the existing system, new rules should be introduced at the regulatory level as soon as possible to make up for them.
Second, it is recommended that the Hainan Hainan Airlines Group Joint Working Group make a public statement.
Second, it is recommended that the Hainan Hainan Airlines Group Joint Working Group make a public statement.
HNA Group forcibly postponed the “13 HNA Bonds” event or hinted that its liquidity is exhausted, and has no choice but to take into account the basic rules of the capital market. Such a signal is very detrimental to maintaining social and market confidence and dissolving HNA ’s hundreds of billions in debt.
It is recommended that the joint working group make a public statement on the progress of HNA ’s debt processing and the future plan for the payment to eliminate the negative impact of the incident on financial institutions and the open market.
3. It is recommended that HNA’s debt restructuring parties give priority to repurchase publicly-raised corporate bonds.
3. It is recommended that HNA’s debt restructuring parties give priority to repurchase publicly-raised corporate bonds.
According to WIND data, HNA Group currently has 8 remaining bonds with a balance of about 15 billion yuan, including “13 HNA Bonds” 4 publicly-raised corporate bonds with a total amount of less than 8 billion yuan.
Considering that the public debt default and improper disposal have a greater negative impact on the market and society, it is recommended that HNA ’s debt restructuring parties consider prioritizing public buybacks Corporate bonds . Judging from the current price of less than 30% off the “15 HNA Bonds”, only more than two billion yuan is needed. This will allow HNA Group to take the initiative in the next step of debt disposal.
(Author Chen Xin is a professor at the Shanghai Institute of Advanced Finance at Shanghai Jiaotong University)