(Bloomberg)—HNA Group Co., one of Deutsche Bank AG’s biggest shareholders, cut its stake in the company two months after saying it wouldn’t as the Chinese conglomerate tries to raise $16 billion to deal with financing problems at home.
HNA, which shot to international prominence by spending more than $40 billion on acquisitions across six continents since 2015, reduced its holding in the German lender to 7.9 percent from 8.8 percent as it allowed portions of a complex derivatives arrangement to expire, according to a filing on Saturday.
The move follows a string of negative developments at Deutsche Bank, including a tumultuous management revamp and the inadvertent transfer of 28 billion euros ($35 billion) to one of its outside accounts, which Bloomberg News reported Thursday.
For HNA, the transaction comes soon after it unloaded its stake in Hilton Worldwide Holdings Inc., the biggest disposal in a purge that’s resulted in the once-acquisitive Chinese group selling more than $12 billion in assets this year. The company, which is said to have told creditors that it plans to dispose of about $16 billion in assets during the first half, still has billions of real estate assets up for sale.
HNA said it’s still committed to remain a “major investor” in Deutsche Bank. That’s the same language the Chinese company used in mid-February when it lowered its stake from about 9.9 percent and said no further cut was planned. The decision was made “due to the current market environment,” a spokesman said by email on Saturday.
Much of HNA’s interest in the German bank is held through derivatives contracts, with agreements involving 65.5 million Deutsche Bank shares scheduled to expire in various batches by July 20, according to a filing last year.
HNA bought its shares in Deutsche Bank last year when it was trading between 14.70 euros and 17.67 euros each but as the stock tumbled to below levels reached during the depths of the global financial crisis, the Chinese company reduced its stake by exercising its option to sell the German lender’s shares at 15 euros apiece, limiting its losses, according to regulatory filings.
HNA doesn’t generate enough profit to cover its interest payments and its short-term debt soared to more than 185 billion yuan ($29 billion) in the first half of 2017, exceeding its cash reserves. It also postponed a planned share sale in its aircraft ground-handling company Swissport Group, roughly two weeks after abandoning a similar plan for its Swiss airline caterer, Gategroup Holding AG.
Deutsche Bank shares have fallen 27 percent this year. The only company that has performed worse on the Bloomberg Banks & Financial Services Index is Banca Monte dei Paschi di Siena SpA, which was rescued by the Italian state.
A weeks-long leadership tussle at Deutsche Bank claimed the scalps of Chief Executive Officer John Cryan and two of of his top lieutenants and prompted widespread criticism of chairman Paul Achleitner for his handling of the matter. The transfer error happened after Cryan had tried to improve controls that had failed the lender in the past.
Kim Hammonds, the bank’s chief operating officer and head of IT, is among those set to depart. The transfer error, which was quickly reversed and caused no financial harm, didn’t contribute to the dismissal of either Hammonds or Cryan, two people with knowledge of the matter said.
A veteran of Boeing Inc. and Ford Motor Co., Hammonds had ruffled feathers by calling the bank “the most dysfunctional company” she’d ever worked for at an internal meeting. She never disowned the comments after they leaked to the press.
--With assistance from Prudence Ho.To contact the reporters on this story: Steven Arons in Frankfurt at [email protected]; Ross Larsen in Rome at [email protected] To contact the editors responsible for this story: Dale Crofts at [email protected] Steve Geimann, Dylan Griffiths, Young-Sam Cho
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