China Huarong Asset Management Co., Ltd. update
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Chinese investors backed by the state will bail out Huarong Asset Management, as the pressured bad debt management company posted a loss of 103 billion yuan ($15.9 billion) after months of uncertainty in its financial situation.
The state-owned company said on Wednesday evening that Bank of China CITIC, Cinda Asset Management, China Insurance Investment, China Life Asset Management, and asset manager Sino-Ocean Capital, which are also bad debt managers, intend to make a strategic investment in a bank. The amount was not disclosed.
The proposed capital injection to Huarong has prompted the company’s bonds in the international market to rise, and it has borrowed more than US$20 billion. On Thursday, its perpetual bonds rose 11% to 95 cents per dollar, compared to as low as 49 cents in April after the sell-off.
The announcement was a turning point for China’s largest distressed debt investor. The company’s failure to announce its annual financial results in April plunged it into turmoil and triggered broader concerns in Asian credit markets about whether Beijing would allow corporate defaults.
Paul Lukaszewski, director of corporate debt for the Asia-Pacific region at Aberdeen Standard Investments, said: “The end-of-the-world scenario that some people think will become a reality is being avoided.” He added that state-owned companies should “be in the eyes of investors. Maintain the status quo, with a view to gaining state support, so as to continue to enter the capital market.”
Huarong said in a statement on the Chinese social media platform WeChat that it “has no plans” to restructure its debt.
The heavy losses confirmed people’s concerns about the huge loopholes in the company’s finances.Huarong attributes its losses to the impact of the coronavirus pandemic and Lai Xiaomin’s tenure Executed for financial crime In January.
“In 2020, as former chairman Lai Xiaomin held a court sentence for the crimes of bribery, corruption, and bigamy, the group will continue to clean up and dispose of risky assets caused by radical operations and disorderly expansion during his tenure.” Exchange documents.
Huarong, which lists the international private equity group Warburg Pincus as its main investor, said its loss of more than 100 billion yuan in 2020 is based on unaudited financial data. The net profit attributable to shareholders in 2019 was RMB 1.4 billion.
Huarong held a general meeting of shareholders on Tuesday and obtained shareholder approval to withdraw from one of its non-core departments, namely the consumer finance business. The company also supports the appointment of Liang Qiang as the new president. Liang was recently promoted to the head of another bad debt business, Great Wall Asset Management.
Huarong was established in the late 1990s to help clean up the Chinese banking industry after the Asian financial crisis, and was listed in Hong Kong in 2015. Its Hong Kong-listed stocks are still suspended from trading after the announcement this week.
Supplementary report by Shanghai Wang Xueqiao