HNA Group Co’s New York-based charity has begun an assessment that may shed light on the mysterious top shareholder of the Chinese conglomerate that owns large stakes in Deutsche Bank and Hilton Worldwide Holdings.
Hainan Cihang Charity Foundation, which owns 29.5% of HNA, has hired external consultants to value the non-profit organisation’s assets and the results may be announced after the appraisal, Zhao Quan, a board member at HNA Group, said in an interview on Friday. HNA has an indirect interest in the New York charity, he said, without elaborating.
“HNA, as a large private investment group, has done a lot of public and private investments so it is very difficult for us to do a thorough evaluation of the assets in the New York Cihang foundation,” said Zhao, who was formerly the group’s chief financial officer. “But we have hired in New York professional agencies, finance teams and consultancies to start the evaluation.”
Should the valuation of those shares come close to their $22bn book value, it would make Hainan Cihang one of the biggest charities in the world. 
The foundation, which came out of nowhere to emerge as HNA’s biggest shareholder in a July disclosure, has been at the centre of the mystery surrounding HNA’s ownership after the charity inherited most of its shares in the group from a little-known Chinese investor.
“This is merely the first in a bucket list that international investors would like to know in order to be comfortable with HNA’s corporate governance,” said Warut Promboon, managing partner at credit research firm Bondcritic. “Top on the list would be who owns the foundation and why the foundation came to own HNA.”
Other than that it was set up in December of last year, little is known about Hainan Cihang and how it’s run. Still, it’s set to appoint former German Vice Chancellor Philipp Roesler as the foundation’s chief executive officer, people familiar with the matter said in November.
“Cihang foundation operates independently and HNA seeks to maintain their independence,” HNA Chief Operating Officer Gao Jian, who was also present in the interview, said.
Aside from the New York organisation, HNA has a sister charity called Hainan Province Cihang Foundation based in HNA’s home in the island resort of Hainan. 
The Chinese charity owns almost 23% of HNA as its second-largest shareholder. Combined, the two Cihang charities own a majority stake in HNA.
Though not much is known about the foundation based in Hainan either, it had 890mn yuan ($135mn) in assets and received about 7mn yuan in donations in 2015, according to its latest annual report. The charity hasn’t released its 2016 figures yet.
The mystery behind HNA’s ownership has been one of the reason why the Chinese conglomerate has been facing questions from regulators worldwide. The other reason the acquisitive conglomerate – which announced more than $40bn in acquisitions since the beginning of 2016 – has been under scrutiny is its mounting debt, which has driven up its borrowing costs and prompted S&P Global Ratings and Fitch Ratings to voice concerns about at least four companies in the past week because of their ties with HNA.
In response to mounting concerns over its debts, Zhao said HNA has a healthy debt structure and stable cash flow. The company is in no risk of defaulting on its debt in the coming year and its debt costs are likely to fall after bank liquidity rebounds, he said. HNA has used more than 500bn yuan of its total credit lines, which amount to about 800bn yuan, Zhao said.
HNA had about $28bn in short-term debt as of the end of June, exceeding the company’s level of cash. 
The company also earned less profit than its interest expenses during the first half of the year, according to its latest semiannual report.
Also during Friday’s interview, HNA’s chief investment officer James Wang said the company plans to continue acquiring companies, though they’ll comply with the Chinese government’s guidelines on outbound investments. HNA’s future purchases and asset sales are likely to be conducted by units that the group has acquired, Wang said.
“This is only a small reactive step forward and unlikely to appease market concerns,” said Corrine Png, CEO of Singapore-based Crucial Perspective, a specialist in Asian transportation equities. “Investors and creditors will not only need to know what is the current appraised valuation of their key assets but also what are the plans with regards to divesting some of these assets in order to deleverage and simplify the group structure.”

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