ANZ Sale of UDC Finance to HNA Officially Collapses

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Financial group Australia and New Zealand Banking Group Ltd.’s (ANZ) plans to sell its asset finance business UDC Finance Ltd. to Chinese conglomerate HNA Group Co. Ltd. officially collapsed on Friday, after being opposed by New Zealand regulators over doubts with HNA’s corporate framework.

ANZ New Zealand’s chief executive David Hisco said they will continue to assess their strategic options.

The company stated in December that it would drop out of the agreement unless HNA turns over the decision.

HNA had the option to appeal the regulator’s decision, but the bank can use a section in its sales contract to walk away from the deal.     

The aviation-to-shipping group said that it had nothing to further add at the moment. HNA last month stated New Zealand regulator’s decision was conflicting with other watchdogs’ perspectives. These regulators had approved HNA and other Chinese investments.

Analyst David Ellis stated that it was indeed a hindrance, but it was not a bad outcome as well, since it is still profitable, makes good return on equity and is well-suited within the group business. Ellis added that the bank is highly likely to find another buyer.

HNA Transparency Under Scrutiny

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ANZ agreed last year to sell its largest non-bank lender to the Haikou-based company for $460 million. The deal was meant to form part of the bank’s goal to achieve A$3 billion ($2.3 billion) of disposals.

However, New Zealand’s Overseas Investment Office in December refused to support the transaction, citing concerns over HNA’s ownership structure. The regulator said that it could not confirm who would control the asset.    

The failed acquisition of UDC is the latest setback to HNA’s overseas drive into the financial sector. For the past two years, the company has spent $50 billion in debt-fuelled takeovers. It could have also been the first New Zealand deal for the group.   

Significant debt and unclear corporate makeup has put the aviation-to-property group under intense scrutiny from regulators worldwide.

HNA announced earlier this week that it did not completely reveal the companies related to the stake it holds in Virgin, Australia.  

Index provider Standard & Poor’s Financial Services LLC downgraded late last year HNA’s credit rating.

The rating agency noted HNA’s large debt maturities over the next several years and saw its borrowing costs have considerably grown.

The conglomerate has completed a number of short-term deals at higher costs of financing. This has resulted to speculations that some of its units are going through a liquidity crisis.

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