China's HNA to sell over $2 billion Avolon stake to Orix: sources

By Anshuman Daga and Kane Wu

SINGAPORE/HONG KONG (Reuters) - China's HNA Group Co Ltd is in advanced talks to sell a 30 percent stake in aircraft lessor Avolon Holdings Ltd to Japan's Orix Corp (Tokyo:8591.T - News), two sources said, as the company attempts to restructure and trim stakes even in its core assets.

The aviation-to-financial services conglomerate, which has racked up massive debt from acquisitions in recent years, is nearing a deal to sell the stake in Dublin-based Avolon for about $2.2 billion, the sources, who were familiar with the matter, told Reuters.

One of the sources said the parties could announce a deal as early as Wednesday.

"HNA's liquidity problems are well documented. This is one way to ease pressure on the group," another source said.

All the sources spoke on condition of anonymity as they were not authorized to speak to the media. HNA, Avolon and Orix declined to comment.

HNA bought Avolon for $2.5 billion in 2015 via Bohai Capital Holding (Shenzhen:000415.SZ - News), which HNA controls.

Avolon then agreed to acquire the aircraft-leasing arm of CIT Group (NYSE:CIT - News) for $10.4 billion in late 2016, creating the world's No.3 aircraft lessor after General Electric's GE Capital Aviation Services and U.S.-listed AerCap (NYSE:AER - News).

HNA accumulated assets ranging from a stake in Deutsche Bank (DBKGn.DE) to high-profile overseas properties during its $50 billion shopping spree in 2016 and 2017.

It says it has now shifted focus to its core aviation, tourism and logistics businesses as it tries to slash its debt pile, but it has also been selling down aviation-related assets.

HNA has agreed to sell $10 billion in real estate, has sold a stake in Hilton Worldwide Holdings Inc (NYSE:HLT - News) and trimmed its Deutsche Bank stake as part of a wider reorganization.

Last month, HNA sold part of its holdings in Swiss-based airline caterer Gategroup Holding, weeks after investors including a unit of Temasek Holdings Pte Ltd bought stakes in Hainan Airlines Holding Co Ltd (Shanghai:600221.SS - News).

Hainan Airlines, China's fourth-largest airline, is considered HNA's crown jewel.

HNA is keen to get a full price for a stake sale in Avolon, sources said earlier this month.

Avolon has a fleet of 890 aircraft and counts 156 airlines among its clients.

The stake purchase by Orix will help its fully-owned unit Orix Aviation, which is already among the world's leading lessors, to expand its market share at a time when a flood of Chinese money has been shaping the $280 billion-strong leasing industry as a significant new asset class.

Japanese lessors are also large players in the sector.

Bloomberg first reported news of the HNA-Orix talks.

(Additional reporting by Junko Fujita in TOKYO and Ishita Chigilli Palli in BENGALURU; Editing by Gopakumar Warrier, Himani Sarkar and Adrian Croft)