(Bloomberg) -- Deutsche Bank’s largest investor, China’s cash-strapped conglomerate HNA Group Co., reduced its stake in the German lender slightly while pledging to remain a “significant” holder as it reorganizes the financing of the stake.

HNA held 9.2 percent of voting rights in Deutsche Bank, according to a regulatory filing Friday, down from 9.9 percent previously. HNA holds about 4.3 percent of shares, with the remainder tied to a right to recall shares that have been loaned, the filing showed.

“HNA will continue to be a significant investor in Deutsche Bank,” a spokesman for C-Quadrat Asset Management, which oversees the investment for HNA, said in a statement. “It is possible that voting right thresholds will be temporarily crossed” as HNA works on a “long-term-oriented financing structure” for the stake.

HNA is under mounting financial pressure after it spent billions of dollars on a debt-fueled acquisition spree that included the stake in Deutsche Bank. The Chinese group is seeking to sell real estate in the U.S. valued at about $4 billion as it seeks to cut its pile of debt, according to marketing documents seen by Bloomberg.

HNA had financed and hedged its Deutsche Bank stake through a series of transactions with UBS Group AG. The first of these hedges, known as collar options, were due to be triggered starting next week if Deutsche Bank’s share price remains below 15 euros, according to prior filings.

Selling Assets

Deutsche Bank fell 2 percent to 12.55 euros at 1:07 p.m. in Frankfurt, the lowest since November 2016.

Deutsche Bank Chief Executive Officer John Cryan said in an interview a week ago that the relationship with HNA remains “fine” and he wasn’t aware of any plans to change the investment.

“HNA is known to have financial problems and be selling assets, so this doesn’t necessarily mean they doubt Deutsche Bank’s turnaround strategy,” Markus Riesselmann, an analyst at Independent Research who has a buy recommendation on Deutsche Bank shares, said by phone from Frankfurt.

Partly behind the reversal of HNA’s fortunes is China’s clampdown on capital outflows and a campaign to snuff out risks stemming from the country’s mounting pile of corporate debt. In HNA’s case, it doesn’t earn enough profit to cover interest expenses that, according to Bloomberg data, have soared to levels topping those of any non-financial company in China.

Other than Deutsche Bank, HNA has also taken collar trades to limit risk in its investment in Dufry AG, the world’s largest duty-free retailer. HNA hedged its entire 20.9 percent stake in Dufry with JPMorgan Chase & Co. through August 2021, according to a filing in December.

(Updates with details from filing starting in second paragraph.)

To contact the reporters on this story: Steven Arons in Frankfurt at sarons@bloomberg.net, Prudence Ho in Hong Kong at pho83@bloomberg.net, Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel, Patrick Henry

©2018 Bloomberg L.P.

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