CFIUS triggered by HNA Group’s management change

Although there has not yet been a change of ownership, the recent change in management of HNA Group, the heavily indebted Chinese airline conglomerate and aggressive global M&A acquirer of recent years, should be enough to initiate a national security review of the group’s U.S. holdings, according to a Bloomberg report.

By the terms of the law, changes of ownership or control can trigger jurisdiction of the Committee on Foreign Investment in the U.S. (CFIUS) with respect to U.S. entities.

HNA was put into critical condition by the coronavirus last month, as concerns about Covid-19 illness crippled air travel. As of Feb 29, the provincial government of Hainan had “appointed new leaders atop HNA and is assuming management of its liquidity risks.” The HNA global corporate structure of subsidiaries and affiliates, of which Hainan Traffic Administration Holding Co. Ltd. is the ultimate parent, includes over 440 entities, including U.S. entities.

Among HNA’s subsidiaries is Ingram Micro, a California company that was acquired by HNA in 2016. The acquisition was reviewed by CFIUS, and Ingram Micro is currently subject to an agreement with the Committee under which it “is required to operate as a standalone company, and is subject to annual audits of its compliance with certain operating and security agreements, according to Moody’s Investors Service.” HNA is also the ultimate parent of Delaware company Swissport USA Inc.