Ingram Micro CEO: HNA Financial Difficulties 'Cannot Impact' Distributor

'You may have seen the latest rumors and speculation related to the financial difficulties faced by HNA Group. The Ingram Micro executive team and I want to assure you that it remains irrelevant for us at Ingram Micro,' Ingram Micro CEO Alain Monié wrote in a letter to partners.

Ingram Micro CEO Alain Monié reassured partners this week that the indebtedness of parent company HNA Group, and a threat that it could be nationalized by China, will not spill over to the IT distributor.

“Ingram Micro operates as a separate stand-alone company that is not and cannot be integrated with HNA,” Monié wrote in a Feb. 25 letter to partners. “This is mandated by the U.S. government and has effectively insulated our company from HNA to minimize impact from any issues that may be experienced by HNA or its affiliates.”

The letter came days after Bloomberg reported that HNA Group—which primarily operates as an air carrier but has expanded its lines of business rapidly in recent years through borrowing and M&A—could be nationalized by the regional Chinese government after a sharp decline in revenue at its travel business due to the coronavirus outbreak.

[RELATED: Ingram Micro: Any Change In Ownership Will Not Impact Operations]

Monié said Ingram Micro’s financial and operational independence is dictated by U.S. policies, which would have to be changed by the U.S. to allow the Chinese government to take over the Irvine, Calif.-business.

“We believe it is extremely unlikely the U.S. government would approve the transfer of ownership of Ingram Micro to a Chinese government entity,” he wrote. “Additionally, as we have for the past three years, we continue to operate in close cooperation with U.S. government agencies designated to ensure that HNA's ownership of Ingram Micro poses no threat to U.S. national security interests.”

Further, Monié said Ingram Micro does not rely on HNA for funds, and it keeps Ingram Micro’s debt separate from HNA. In addition, he said HNA cannot saddle Ingram with its own debt—about $75 billion according to an article in the South China Post.

“Any debt at the HNA level has no recourse to Ingram Micro or our financing facilities, therefore, financial difficulties or a default by HNA cannot impact Ingram Micro,” Monié told partners. “Finally, our balance sheet is also protected so that the only way Ingram Micro is allowed to send money to HNA is through the payment of dividends, which are limited by our financial covenants. What all this means for us—and for you—is that any potential change in ownership to a foreign entity does not and cannot impact this separateness required by the U.S.”

Mark Essayian, president of Lake Forest, Calif.-based MSP KME Systems and a member of the Ingram Micro Trust X Alliance, said he has been impressed with how Ingram Micro has handled the news of a potential HNA takeover as well as supply chain disruptions due to coronavirus quarantines. He said Ingram Micro Executive Vice President and President of Global Technology Solutions Paul Bay held a conference call earlier this week with Trust X partners, Ingram Micro’s community of resellers.

“He was very candid and very up front about what they’re looking to do, how they are looking to mitigate the supply chain, and that they are absolutely protected,” he said. “I think they’re doing their best to get in front of this and I respect them for that.”

A U.S. firm that handles press calls for HNA Group did not immediately return a call for comment. In his letter to partners, Monié said HNA’s financial difficulties are “irrelevant” to Ingram Micro partners.

“We've faced rumors and noise around HNA's financial difficulties for a few years and this will likely continue, especially in the recent weeks as the coronavirus outbreak has impacted significantly one of the major businesses of HNA: their airline business,” he wrote. “But on our side, we have executed incredibly well in the face of this noise, delivering a second straight year of strong financial performance, including strengthening our balance sheet, while never wavering from our commitment to do everything we can to help you profitably grow your business.”