HNA via GAR? The mystery of Deutsche Bank’s largest shareholder

FT 2018-02-27刊文:HNA via GAR? The mystery of Deutsche Bank’s largest shareholder

Who is Deutsche Bank’s largest shareholder?

This should not be a difficult question and, at first, the answer seems straightforward: China’s HNA Group.

The airline-to-finance conglomerate built up a 9.9 per cent stake then worth nearly $4bn in Deutsche last year, just shy of the 10 per cent threshold above which stake purchases must be approved by Germany’s financial watchdog. While this has fallen to 8.8 per cent in recent weeks, HNA should still be the largest single shareholder on paper.

But, anyone with even a cursory interest in the deeply unusual Chinese company will realise things are a little bit more complicated than that. To get closer to the real answer we first have to tell the story of the medical ‘magic mushroom’ investor, the opaque equity derivatives, and the mysterious Bermuda entity about which Deutsche says it has no information.

If that sounds fantastical and obscure, please bear with us.

HNA is one of China’s largest private conglomerates and over the past few years it has been on a $40bn buying spree, snapping up businesses around the world, as well as building minority stakes in large listed companies like US hotel chain Hilton.

This debt-fueled rise from a small regional Chinese airline to one of the country’s most prominent overseas deal-makers has left many observers asking several questions about a group whose true ownership is shrouded in mystery. Not least among them: what actually is HNA?

The best capsule explanation we’ve seen of HNA’s complicated group structure comes from an investor presentation for a bond the group tried to issue in 2012. The deal never got off the ground, but in an accompanying presentation given by Sapinda – an investment group run by the flamboyant German financier Lars Windhorst – the Chinese group was described as follows:

HNA Group is essentially part of an interconnected web of Chinese investment groups, both public and private. To outsiders this seems opaque and confusing, but investors should take comfort from close government relationships at many levels both above and within the HNA umbrella.

So HNA is less a company and more a complex web of corporate entities, connected through overlapping interests in one another and inter-linking debt. The financing of these different groups has come under strain in recent months, as a result of an official crackdown on risky financing at acquisitive private enterprises in China, which saw the government take over Anbang Insurance last week.

And with liquidity issues now rippling through HNA Group’s network, the parent company is shifting around these different entities and their debts in order to stay above water.

Equity analysts at UBS tried to map out this corporate structure in a recent report titled “What if HNA Group is the black swan of the equity and bond markets in 2018?”. See below:


Note this complicated chart actually simplifies HNA’s sprawling network of companies. In fact, none of the entities that directly hold the Deutsche Bank stake are shown.

To explain where Deutsche fits in the HNA empire, we first have to start with an Austrian asset manager, C-Quadrat, whose forthright founder is better known for investing in jurisdictions mainstream investors tend to shun.

Out of Africa: Alexander Schütz and Christian Angermayer

C-Quadrat is a publicly listed Austrian asset manager that HNA took majority control of last year. It manages the fund through which the Chinese group holds its Deutsche stock.

The head of C-Quadrat is Alexander Schütz and he was profiled in the FT in 2015, where he candidly admitted that the group breaches “stupid” regulatory requirements on a monthly basis.

Outside of his work at C-Quadrat, Mr Schütz is involved in a number of finance ventures in Africa, such as MyBucks, a financial services provider that operates in countries such as Zimbabwe, Swaziland and Uganda.

Mr Schütz’s main co-investor in MyBucks is Christian Angermayer, a German entrepreneur who has backed everything from cryptocurrencies to a start-up looking to treat depression using the active ingredient in “magic mushrooms”.

It is Mr Angermayer who takes credit for coming up with the idea for HNA’s investment in Deutsche Bank.

He said that he helped devise the plan to purchase Deutsche stock at the end of 2016, and his firm, Apeiron Advisory, formally advised HNA and C-Quadrat on how to structure the transaction.

Mr Angermayer told the FT this mandate to advise HNA ended after Deutsche Bank’s annual general meeting last year, which saw Mr Schütz appointed to the German lender’s board as representative of HNA.

Mr Angermayer added that he subsequently introduced the HNA Group to Philipp Roesler, the former vice chancellor of Germany who recently became head of HNA’s New York-based charitable foundation.

Hot under the collar

What Mr Angermayer helped devise is incredibly complicated.

Two HNA vehicles bought the stock through a special purpose vehicle designed solely for the trade, C-Quadrat’s “special situations” fund. The acquisition of the shares was financed through a combination of margin loans and so-called “funded equity collars” — another form of stock-based lending that uses derivatives.

UBS arranged the equity collar and, alongside ICBC Standard Bank, provided the margin loan. The two banks restructured this position in December, increasing the size of the equity collar and reducing the size of the margin loan.

The use of these leveraged products raises the question of whose hands HNA’s stock now sits, particularly as Deutsche Bank’s stock is down nearly 14 per cent year-to-date. For example, US hedge fund Elliott in December built up a 5.6 per cent stake in Swiss duty-free retailer Dufry after buying shares HNA had committed to another equity collar.

But even putting those questions aside, what exactly are the two HNA entities that bought the Deutsche Bank stock? Why split the stake between two corporate vehicles anyway? And how do they fit into the sprawling “interconnected web of Chinese investment groups”?

Trying to get to the bottom of that raises more questions than answers.

“Of course we know about GAR Holdings”

The two entities that bought the Deutsche Bank stock through C-Quadrat are HNA Innovation Finance and BL Capital Holdings.

BL Capital is an entity registered in the British Virgin Islands. A bond prospectus from 2015 shows that it is owned by HNA Capital in Hong Kong and ultimately connects up to the parent company HNA Group as follows:


So when the 9.9 per cent stake was built up last year, BL Capital bought a 4.39 per cent stake of Deutsche Bank through C-Quadrat’s special situations fund. The BVI entity is owned by Hong Kong’s HNA Capital Holdings, which is in turn owned HNA Capital Group in the People’s Republic of China, which is then finally owned by the parent company HNA Group.

It’s possible HNA has since shuffled BL Capital somewhere else in its group, but at least we have some idea of how it fits into the overall picture.

HNA Innovation Finance is another story, however.

The group was founded at the start of 2017, primarily as a commodities trading unit, entering into a joint venture with Glencore soon after it was established.

HNA Innovation Finance is the main unit that still holds the Deutsche Bank position, holding a 5.2 per cent share of the bank’s voting rights according to a regulatory filing made this month.

But who owns HNA Innovation Finance?

While the answer is not immediately obvious, the HNA website offers a presentation titled “Profile of Innovation Finance”, which hints at the entity’s ownership.

The top right hand corner of the first slide of this “introduction” to the group has a corporate logo for an entity called “GAR” below HNA’s logo. This GAR logo appears elsewhere in the presentation, although the nature of the company is never explained.

In German regulatory filings, HNA has disclosed an entity called variously “GAR Holdings Ltd” and “GAR Holding Ltd” in the chain of companies that controls the Deutsche stock.

In a May 2017 filing, HNA disclosed the “full chain of controlled undertakings starting with the ultimate controlling natural person or legal entity”. The list runs:

  • Hainan Jiaoguan Holding Co, Ltd.
  • HNA Group Co, Ltd
  • HNA Group (International) Company Limited
  • GAR Holdings Ltd
  • HNA Innovation Finance Group Co, Limited

However, in a filing this month, the list had changed:

  • Hainan Jiaoguan Holding Co, Ltd.
  • HNA Group Co, Ltd
  • HNA Group (International) Company Limited
  • GAR Holding Ltd
  • HNA Innovation Finance Holdings Limited
  • HNA Innovation Finance Group Holdings Limited
  • HNA Innovation Finance Group Co, Limited

The Bermuda companies register has an entry for a GAR Holding Ltd, with HNA Innovation Finance’s chief executive Kevin Guo listed as a director.

But what exactly is GAR Holding/Holdings? Very few people seem to know and HNA itself did not respond to a request for comment on the entity, its ownership, or if the Bermuda filing relates to the relevant entity.

One of the groups that should know is C-Quadrat. The fund manager’s spokesman said the following: “Of course we know about GAR Holdings and its ownership. We have informed and provided the necessary details to the relevant authorities when filing.”

He declined to disclose that information to FT Alphaville.

Don’t mention the GAR!

Another group which might be expected to know more about GAR is Deutsche Bank itself.

After all, not only is HNA Deutsche’s largest shareholder, but the group’s investment bank has arranged deals for the Chinese conglomerate in the past. This means that Deutsche should run regular “know-your-client” checks on HNA, and people familiar with the matter say that the bank ran an additional due diligence check on HNA last year after it built up the stake. (A spokesman for the bank declined to comment on this).

And yet, the bank has declared in court it does not know anything about GAR.

A group of Deutsche Bank shareholders last year launched what is known as an Anfechtungsklage – a German legal method of voiding shareholder resolutions that are deemed improper. The action was headed by Karl-Walter Freitag – a man widely acknowledged as the master of the Anfechtungsklage – who has variously been called both the Robin Hood of German capitalism and the nation’s most infamous extortionist.

The action aimed to overturn certain resolutions decided at Deutsche’s 2017 AGM, such as the appointment of Mr Schütz to the board. While the Anfechtungsklage failed in Frankfurt’s lower court, a hearing at the higher court is still pending. And, in the initial action, Deutsche Bank had to respond to several questions from the investors.

In response to a question from the investors about GAR, Deutsche Bank said that it only has information contained in regulatory filings, adding that it does not have any further information on where GAR is based and who owns it.

Has Deutsche done more digging into the ownership of GAR since the Anfechtungsklage was filed in June? A spokesman for the bank said only that it has no reason to believe that HNA’s recent voting rights filing is incorrect, declining to comment specifically about GAR.

Deutsche Bank is not just any old bank. It is high up on the Financial Stability Board’s list of “global systemically important banks” and worries about its financial health have fueled broader market ruptures in the past – for example, when fears grew in 2016 about its ability to continue making interest payments on high-risk bonds.

It is important to identify the largest shareholders of systemically important banks. Particularly when it comes to a complicated and sprawling group like HNA, who Swiss authorities have recently said provided them with “untrue or incomplete” information regarding its ownership. At the time HNA said in a statement: “We co-operated fully with the Swiss Takeover Board’s inquiry, and we respect its authority in this matter.”

So in summary: an opaque Chinese conglomerate says that it is the largest shareholder of Germany’s biggest bank, and has claimed a seat on the board. But the publicly available trail of information ends in Bermuda, obscuring a crucial link in its convoluted chain of ownership, and the parties involved seem reluctant to say anything about it.

If anyone out there does know anything about GAR, please get in touch.

* 本文 仅 代表 原作者 观点, 不代表 RTS24 的 观点 和 立場 *


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