UDC buyer HNA pays top dollar for US debt

UDC, which specialises in heavy machinery financing and also lends in other fields, is being taken over by China's HNA. Photo / NZ Herald

HNA, the Chinese conglomerate that is in the process of buying New Zealand finance company UDC Finance from ANZ, is paying top dollar for its investment in US debt markets.

Financial news wires reported last week that the company priced US$300 million worth of 363-day bonds at 8.875 per cent - about 3 percentage points more than it paid for three-year debt in sold in the US market in May, which had a coupon rate of 6 per cent. That bond, which matures in 2020, last traded at 6.7 per cent.

Financial news and information company Bloomberg said the latest bond sale was an indication that HNA's US$40-billion-plus acquisition spree, in which it became the largest shareholder in companies such as Deutsche Bank and Hilton Worldwide Holdings, was catching up to the company as it accumulated about US$28 billion in short-term debt.

The $660 million UDC deal is with the Overseas Investment Office and the Reserve Bank awaiting approval.

Bob Fast, president and chief executive of TIP Trailer Services - an HNA subsidiary - said there were a number of steps to go through before the UDC deal could be completed.

"TIP Trailer Services, the subsidiary of HNA Group that is leading the purchase of UDC, is in regular contact with the regulatory bodies including the Overseas Investment Office and the Reserve Bank of New Zealand regarding the application to purchase UDC Finance Ltd (UDC) from ANZ Bank New Zealand Ltd (ANZ)," he said in comments supplied to the Herald on Friday.

"There are a number of steps to work through, as well as regulatory approvals, to complete the sale and separation process and as such we don't have a timeframe," he said.

UDC chief executive Wayne Percival told the Herald in May that it was business as usual for New Zealand's biggest finance company as its ownership passes from ANZ to HNA.

ANZ announced the sale of UDC in January and the transition to its new owners was expected to be complete by the fourth quarter of this year.

UDC, which has been operating for 75 years, is big in vehicle, plant, equipment and machinery financing and has a loan book of $2.8 billion.

On completion of the transaction, UDC will sit under and report to Global TIP Holdings.

Last year, UDC posted a record annual profit, driven by booming car sales and strong growth in forestry, transport and construction, of $58.5m.

The sale of UDC to HNZ drew some flak during in the run-up to the last election and during coalition talks.

In comments made to while coalition talks were in progress, NZ First leader Winston Peters emerged as a critic.

"That's the kind of sad country we have become, and that's what we're [trying to] address in these coalition talks," Peters said then.

HNA is China's largest non-bank leasing company operating one of the world's largest aviation finance businesses as well as one of the world's largest container leasing businesses.