wolfstreet.com / by Wolf Richter • Jul 20, 2017
Are the Conglomerates the Black Swan in China?
Bank of America suddenly pulled back from doing business with HNA Group, a privately held Chinese conglomerate that has been on the forefront of highly leveraged, opaque Chinese conglomerates out on a mind-boggling debt-funded acquisition binge around the world.
“We simply don’t know what we don’t know, and are not prepared to take the risk,” Bank of America president for Asia Pacific, Matthew Koder, wrote in an internal email, dated June 28 that was leaked to The New York Times. “Given the importance of maintaining rigorous client selection standards, we have decided not to be involved with transactions with the HNA Group at this point in time.”
So Bank of America is getting scared and won’t do business with HNA. It’s walking away from a lucrative customer that has been generating piles of fees and interest income for the banks. The Times:
On one side of business, banks have helped HNA buy companies by arranging what is called collateralized financing. That has entailed allowing HNA to borrow money against the shares of the company that it is acquiring.
Big banks have also received large paydays for advising on HNA’s acquisitions. HNA and its affiliates overseas have paid an estimated $100 million in fees to banks advising on mergers and acquisitions since 2016….
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