Bloomberg
China says Huarong operations are normal and liquidity is sufficient
(Bloomberg) – China’s financial regulator said that China Huarong Asset Management Co.’s business is normal and the company has sufficient liquidity. This is the first official comment aimed at allaying investor concerns about the financial health of the country’s largest bad debt manager, the state-owned company is actively working with its auditor and will finalize its annual report as soon as possible, the Chinese banking company said and insurance supervisory authority in a statement with. Huarong’s dollar bonds climbed, extending their rally from record lows on Thursday. A lack of communication from Huarong and regulators about the company’s plight has unsettled investors looking for more details on its finances, overhaul plans and Beijing support. Huongong, who owes $ 42 billion to local and offshore bondholders, has rocked Asian lending markets after breaching the March 2020 earnings release deadline. The company was already overshadowed after its former chairman, Lai Xiaomin, was executed earlier this year after he was found guilty of bribery. Under his leadership, Huarong expanded into areas such as securities trading and trusts, a significant departure from the company’s original mandate to help banks eradicate bad debts. Huarong said earlier this week it had “adequate” liquidity and had repaid any bonds that came due in time, but the company has refused to comment on its plans for future payments. The lack of clarity has fueled investor concerns about the potential for debt restructuring, which would be China’s biggest consequence since the late 1990s. Huarong’s dollar bond due in November rose 4.3 cents against the dollar to 82.6 cents from 5:35 p.m. in Hong Kong. The yield, which approached 100% on Thursday, fell to 39%. The company’s offshore bonds rebounded Thursday after it was reported that Huarong had funds for a full repayment of S $ 600 million ($ 450 million) on an offshore note on April 27. The onshore securities division of the company’s onshore securities division Company has transferred funds to repay a local bond due on Sunday, according to those familiar with the matter on Friday. Huarong and its subsidiaries will have to repay or refinance approximately $ 7.4 billion worth of local and offshore bonds this year. The company counts Warburg Pincus, Goldman Sachs Group Inc. and Malaysia’s sovereign wealth fund among its shareholders, according to Bloomberg. The stock has fallen 67% since it was listed in Hong Kong in 2015 and has not been trading since early April. Hu Jianzhong, chief supervisor at Huarong, said at an event in Beijing on Friday that China will see more trouble with bath-in. Market for the sale of assets over the next three to five years as volume increases and prices decrease. Hu did not mention Huarong’s debt position in the speech and declined to comment on the company’s bond repayment schedule or at the time of its annual report on the sidelines of the event. The country’s distressed credit managers are facing mounting pressure from the pandemic, according to a closely watched survey by China Orient Asset Management Co. released Friday, assets are more difficult to dispose of. Increasing credit losses among the managers themselves threaten to negatively affect profits and negatively affect their capital strength in the long term. China Orient, one of the country’s four state bad debt managers, said the report. It also warned of growing difficulties with maturity mismatches as the companies’ liabilities are largely short-term. Financial Industry Regardless, the Chinese regulator said on Friday that the country’s banks’ bad loans rose to 3.6 trillion yuan ($ 552 billion) as of March 31, an increase of 118.3 billion yuan from the end of 2020. The NPL rate fell to 1.89%, 0.02 percentage points lower than at the end of 2020. With the coronavirus largely contained and the economy recovering, Chinese policymakers have renewed a campaign to curb leverage and contain risks, especially in the tightly managed finance and real estate sectors. Last year’s incentive pushed debt down to almost 280% of annual economic output. The central bank last month urged major lenders to curb credit growth for the remainder of the year after a surge in the first two months sparked bubble risk, as those familiar with the matter know are in the economy after the global financial crisis Much of her record debt heaped up when she went for credit to avoid the economic slumps that devastated the West. Efforts in 2017 to contain debt growth, particularly in the shadow banking industry, resulted in higher money market rates and a collapse in government bonds. (Adds background information.) For more articles like this, visit bloomberg.com. Subscribe now to stay one step ahead with the most trusted business news source. © 2021 Bloomberg LP
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