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China debt crunch

Bankrupt HNA's chairman and CEO taken away by Chinese police

Chen Feng and Adam Tan believed to be in custody, but no allegations revealed

HNA Chairman Chen Feng is a co-founder of the Chinese conglomerate. It rapidly acquired international assets after starting as a domestic airline company.   © Reuters

HONG KONG -- The chairman and chief executive of bankrupt Chinese conglomerate HNA Group, one of the country's most prominent buyers of international assets, were taken away by police, according to a statement issued by the company on Friday.

A short announcement on HNA's official WeChat account said the company had been told by police in Hainan Province, where it is based, that "legal coercive action has been taken due to alleged crime" by its co-founder Chairman Chen Feng and CEO Tan Xiangdong, who also goes by the name Adam Tan.

No further details on the allegations against them or their current whereabouts were provided.

The announcement marks the latest turn of fortune for HNA, which grew from its flagship airline business into one of China's most acquisitive conglomerates. During its heyday it bought up assets such as the Radisson hotel chain, aviation services company Swissport Group and stakes in Deutsche Bank and airlines and airports, in countries as far-flung as Brazil, Australia, Ghana, Turkey and South Africa.

The company said in Friday's statement that day-to-day operations of the group and its affiliates were "stable and orderly" and would not be affected by the police action. The debt-laden group's restructuring in bankruptcy, which has been ongoing since its filing in January, was said to be "advancing smoothly."

The group has been under the control of bankruptcy administrators since the People's High Court of Hainan Province appointed them in February. While Chen and Tan maintained their board membership, Gu Gang, who heads the court-appointed working group and the most important Communist Party cell at HNA Group, effectively leads the organization at this point.

On Sept 18, the company, said in a statement on WeChat that the group would be broken up into four independent entities comprising airline, airport, finance, and commercial and other areas. According to Gu, who made the announcement in front of 2,000 employees during an internal conference that day, the potential new entities would "each be led by new controlling shareholders and be completely independent" from one another.

Gu also confirmed that the previous shareholders would be excluded from the post-bankruptcy ownership structure and management. He did not mention Chen and Tan by name. But he said the shareholdings of Hainan Cihang Charity Foundation, the largest shareholder controlled by the previous management team, would be wiped out.

The Hainan court ruled in mid-March that the restructuring procedures be consolidated by merging the parent HNA Group with 320 of its affiliates. The decision to treat them as a single organization followed the court's assessment that the group's management was "highly mixed up" and "chaotic," claiming companies were independent in name only.

The latest creditors' meeting involving the group is set to be held next week.

HNA management is no stranger to turmoil. Wang Jian, its co-founder and then co-chairman, died during a business trip in France in July 2018 as the company was in crisis. French police later declared the death of the group's chief architect for various eye-popping deals to be accidental. According to reports, he fell off a wall in the village of Bonnieux while trying to take a photograph.

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