Korean investors fund half of HNA’s $700 mn debt financing for Gategroup deal

Shinhan Investment Corp. and a South Korean private equity firm have provided $350 million in bridge loans to finance Chinese HNA Group’s $1.5 billion acquisition of Swiss airline caterer Gategroup Holding.

The loans, or senior notes secured on Gategroup shares, represent half of $700 million borrowed by HNA Group for the purchase completed in 2016 and are reportedly expected to offer an average yield of over 6%.

Credit Suisse underwrote the bridge loans of $700 million and resold half of them to the two South Korean companies.

Shinhan acquired $200 million of the loans coming due next March, in a rare case of a South Korean brokerage house participating in a large-size global buyout financing, according to investment banking sources on Sept. 12.

Shinhan, part of a top South Korean banking group, is reselling the $200 million loans to domestic investors by issuing asset-backed commercial paper collateralized by $100 million of the loans.

For the other $100 million, part of them was sold to an unidentified domestic financial services company. It is considering setting up a fund to resell the rest.

“The acquisition financing for the Gategroup deal is scheduled to be refinanced in six months. Considering the short maturity and the collateral which is Gategroup shares, they are relatively safe investment,” a financial industry source told the Korean Investors.

Separately, Lindeman Asia Investment Corp, a South Korea-based private equity house, raised $150 million in a fund to provide the six-month loans. Korean Federation of Community Credit Cooperatives is one of Korean institutional investors participating in the fund.

Lindeman Asia, founded in 2000, focuses on small and mid-cap companies in China and South Korea. Last year, it raised 300 billion won ($266 million) in a fund targeting Chinese companies, collecting 100 billion won each from National Pension Service and state-run Korea Development Bank, and 50 billion won from Korean Teachers’ Credit Union.

HNA Group, the parent company of Chinese carrier Hainan Airlines, has been on an acquisition spree for global expansion. Its cross-border deals include a French in-flight catering company, a Swiss cargo handler and an Irish aircraft lessor, as well as a stake in Hilton Hotels.

By Donghun Lee

leedh@hankyung.com