An HNA Group company has failed to make an early payment it had agreed to on a 1.7 billion yuan ($271.9 million) trust product that falls due next week, two sources with direct knowledge of the situation said, the latest indication of financial stress at the highly leveraged conglomerate.
CITIC Trust issued the one-year loan product last year on behalf of HNA Real Estate Group, a property development arm of the Shanghai-listed HNA Infrastructure Investment Group Co.
Although a payment is officially due on February 16, CITIC Trust had requested early repayment, due to concerns about HNA's liquidity situation and the upcoming Chinese new year holidays, the sources said.
A few days ago, HNA Real Estate provided a promise letter to CITIC Trust stating that it would repay part of the trust loan by Monday, the sources said. That promised early payment failed to materialize due to HNA's tight liquidity situation, they said.
Details on the size of the early payment for the trust product were not immediately available.
The uncertainty over HNA's repayment of the trust loan underscores wider apprehension surrounding the conglomerate, as well heated discussions taking place behind the scenes between the group and its creditors.
Late Tuesday, HNA Infrastructure published a statement to the Shanghai Stock Exchange asserting that the company was able to meet its loan principal and trust income obligations on time.
Repayments on the trust product, HNA Infrastructure said, are staggered from February 16 through the end of November. The company also said it was coordinating with CITIC Trust to "deal with the matter."
CITIC Trust would take legal action against HNA if the payment fails to materialize, one of the sources said, pointing to the value of guarantees HNA pledged for the loan.
The HNA trust loan is guaranteed by the rights to use three plots of land that are part of HNA's Sun Moon Plaza project, a shopping development located in Haikou, South China's Hainan Province, according to a product description.
HNA Infrastructure Investment Group also provided guarantees for the payment, read the description.
CITIC Trust declined to comment.
Meanwhile, HNA said that it wouldn't comment beyond the stock exchange statement.
HNA is facing liquidity pressure and a potential cash shortfall of at least 15 billion yuan in the first quarter of the year, the company told its major bank creditors at a meeting in Haikou last month.
