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Huarong Asset Management, China’s largest serious debt investor, has been downgraded by its international credit rating for its first credit rating in recent weeks, leading to wild bond sales under pressure.
The company, which has a majority stake in the Chinese Ministry of Finance and is worth about $ 22 billion, has been scrutinized because it has repeatedly delayed the publication of its 2020 economic results.
Fitch Ratings downgraded Huarong’s issuer rating from A to B three times late Monday, a level with the lowest level of investment and an indent above the garbage situation. According to the agency, Huarong believes that “indications of government supporter support have not been as rich” as it has assets of about Rmb1.7tn ($ 262 billion) since it confirmed it would lose a second deadline to sue in late April. .
Uncertainty about Huarong’s financial health has also increased execution Former President Lai Xiaomin in January for crimes that included abuse of power to assign bigamy and credit.
The delay in results, along with the announcement of a possible restructuring, has been sparked sharp falls Huarong’s bond prices and investors were forced to reaffirm government support for other Chinese issuers linked to the state in business and international debt markets.
Huarong said a complaint delay is necessary to complete a transaction without specifying details. This explanation raised concerns about the quality of his assets and the business activities of former President Lai.
Huarong’s shares have been suspended in Hong Kong since the beginning of April and the trading of its bonds has not been stable. On Tuesday, the 2022 Huarong bond, which matured in 2022, was trading at 85 cents a dollar, above the 67-cent lows in mid-April.
The company has become a hub for broader discussions about Beijing’s support for companies in offshore bond markets and for discussing the health of China’s financial system. Neuberger Berman’s chief investment officer for fixed income Brad Tank said in a statement that the government is likely to “design a smooth landing”.
“Given the huge ownership of troubled assets at the heart of the economy that is likely to suffer a rise in lending in the coming months, we believe Huarong’s policy is too important for the government to question its stability,” he added.
Huarong is one of four bad debt managers created as part of the cleanup of China’s banking system after the Asian financial crisis of the 1990s. Since then, it has become a financial conglomerate with numerous subsidiaries.
Other Western rating agencies have issued warnings about Huarong in recent weeks, but it has dropped.
This month, China Chengxin Credit changed Huarong’s outlook. “negative”, Citing declining profitability and concerns about high debt levels, but maintained a triple A rating for the company.
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