China's HNA Calls Off Deal With NH Hoteles

December 13, 2011

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Spain's NH Hoteles said on Tuesday China's HNA Group, parent of China's Hainan Airlines, had called off a deal to take a stake in the Spanish hotel group due to financial market uncertainty.

NH Hoteles shares fell nearly 13 pct on the news, as analysts raised concerns about the hotel group's ability to refinance its debt without the expected cash injection from the Chinese group.

The agreement between the two companies, signed in May, was for the Chinese group to subscribe to a capital increase that would give it 20 percent of NH Hoteles for an investment of around EUR€329.9 million (USD$436 billion).

NH Hoteles has to refinance some EUR€600 million in 2012, which Banesto Bolsa analysts said might now prove difficult, forcing the company to increase capital.

"The news (on the deal with HNA) is negative for NH Hoteles which was banking on the funds to help refinance its debt," the analysts said in a research note.

There is now an increased possibility that the hotel chain will have to raise capital to meet its funding needs next year, Banesto Bolsa said.

NH Hoteles received compensation of USD$15 million due to the cancellation of the deal, the Spanish group said.

The hotel chain has suffered from the decline in tourism to Spain over the last few years as a result of the economic crisis and as visitors search for cheaper holiday alternatives.

Its deal with HNA was seen as providing a breathing space for the company, giving it opportunities to access the China tourism market.

It said it will continue to negotiate business opportunities in China with HNA, including the acquisition of a stake in the Spanish firm in the future.