A long-time key foreign partner of China’s HNA Group is fighting to recover what is left of its investment in container leasing giant Seaco.
New York-based Bravia Capital Partners, controlled by Indian-American financier Bharat Sharatchandra Bhise, is seeking to claw back $25m from Bohai Leasing, Seaco and other HNA entities in a lawsuit in the Southern District of New York federal court.
Seaco, the successor to Sea Containers Ltd and GE Seaco, has been controlled by HNA’s Shenzhen-listed Bohai Leasing since 2011. But since February this year, it has been in effect under the administration of China’s Hainan provincial government, with the rest of troubled HNA.
Bravia spearheaded Bohai Leasing’s 2011 acquisition of GE Seaco, along with other transport and logistics acquisitions for HNA over a period of 20 years. The relationship dates back to Bhise’s earlier management of HNA investments for investors George Soros and Purnendu Chatterjee.
The legal battle represents the end of a financial relationship that began with a $25m stake that Soros and Chatterjee’s C-S Aviation Services acquired in HNA’s Hainan Airlines in 1995.
That Soros investment introduced HNA to world financial markets and was the precursor to a period of aggressive acquisitions. Bhise headed the Soros and Chatterjee transport unit until he set up on his own as Bravia to do the same business.
“After leaving CS in 2000, Bharat continued to help Hainan Airlines to grow its fleet and its routes,” according to Bhise’s undated biographical sketch on the Bravia Capital website. “From 2008 onwards, Bharat through Bravia has led HNA Group Co Ltd’s outbound China investments in transportation and logistics.”
Mention of Bravia’s work on behalf of HNA and Hainan Airlines after 2000 was removed from the website last week.
Box leasing acquisition projects
HNA holds 51.8% of the shares in Bohai Leasing. The group’s transport holdings include flagship Hainan Airlines and bulker owner Shanghai HNA Marine Shipping, a successor of its earlier shipowning vehicle, Grand China Logistics. HNA also controls shipyard Jinhai Intelligent Manufacturing.
Other former HNA shipping investments have included Norway-based shipowners SinOceanic and Offshore Heavy Transport, both of which also involved Bravia.
Between 2011 and 2018, Bravia partnered Bohai Leasing as investor and as investment banker in a series of box leasing acquisition projects, including the former GE Seaco and Cronos Ltd.
Officials of Bohai Leasing in Beijing and legal representatives of Bravia in New York did not immediately respond to requests for comment.
Court papers filed by Bravia claim that as of last year, Bohai Leasing owed it more than $70m for services in the acquisitions.
Payment indemnity agreement
In August 2019, Bravia and Bohai Leasing executed a payment indemnity agreement that set $25m as the total payout to Bravia in the event that Bohai Leasing sold Seaco, and Bravia relinquished its claim to 20% of Cronos shares.
Bravia claimed in the legal filings that it agreed to that figure because Bohai Leasing said a sale of Seaco was imminent.
Then in February, Bohai Leasing, along with all HNA assets, was taken over by the government of the island province of Hainan, acting through a creditor’s committee.
“[The] government has replaced HNA’s senior leadership with Hainan government officials, naming Gu Gang as executive chairman, and appointing Ren Qinghua as co-CEO,” lawyers for Bravia told the court. The officials named came from Hainan’s state-owned development agency.
■ The HNA Group began as the provincial airline of southern China’s Hainan Island. Starting from transport, tourism and real estate, it grew aggressively into international holdings as far afield as US chipmaker Ingram Micro and a stake in Deutsche Bank. It has been under administration since February.
■ Founded: 1993. Headquarters: Haikou, Hainan
■ Key subsidiaries: Hainan Airlines, Shanghai HNA Marine Shipping, Bohai Leasing and Jinhai Intelligent Manufacturing.
■ Company leaders: Chen Feng, chairman and founder; Gu Gang, executive chairman.
Bravia also claimed that an estimated net income of $88m in 2020, down from $120m in 2019, indicates that assets have been sold off.
The change of control made the $25m immediately payable, according to Bravia, but it claimed Bohai Leasing is holding back the money and information about the prospective sale of the company.
In Bohai Leasing’s 2011 acquisition of GE Seaco, a 10% share was reported to be in Bravia’s hands. Later, when Cronos was acquired in 2015, Bravia held 20%.
The enterprise value of GE Seaco was reported as $2.5bn and that of Cronos Ltd as $2.4m.
Seaco, now 100% owned by Bohai Leasing, is ultimately the successor company of former London-based box lessor Sea Containers Ltd, founded by Jim Sherwood, who died in May this year.
Bhise has also been involved on the corporate boards of a number of HNA subsidiaries outside transportation, but whether he and his company have acted as co-investor or financial arranger in a given project has not always been clear.
A stake of nearly 30% in the main HNA Group itself was at one point attributed to Bhise.
But Bhise told news agency Reuters in 2017 that he had held that stake in trust for a decade as a service for HNA, receiving no compensation for doing so. The shareholding emerged in July 2017, when HNA announced that the 30% stake had been transferred to a newly formed charitable foundation.
