China Huarong International to cut risk exposure

Business | 21 Apr 2021 10:55 am

China Huarong International Holdings, the key offshore financing arm of the country's embattled distressed loan manager, said it returned to profit in the first quarter and has laid a “solid” foundation for transformation as concerns persist over its ability to repay debt, Bloomberg reports.

The unit, which issued or guaranteed most of China Huarong Asset Management's US$22 billion in dollar bonds, will focus on cutting risk exposure and ensuring liquidity, it said in a statement posted on its WeChat account late Tuesday. All its operating indicators are meeting targets, the company said after holding a meeting on Monday to discuss first quarter operations.

The firm’s dollar bonds jumped early Wednesday before pulling back. Its 5 percent dollar bond due 2025 was up 0.3 cent on the dollar to 82.3 US cents and its 4.5 percent perpetual note added 0.5 cent to 73.9 US cents as of 10:32 a.m. in Hong Kong, Bloomberg-compiled prices show.

Concerns about China Huarong’s financial heath and a pending restructuring have fueled a sharp sell-off in the company’s debt and spread to the offshore bonds of its peers, stoking fears of market contagion. A potential restructuring or default for the bad-debt manager would be China’s most consequential since the late 1990s. Any signs Beijing is rethinking its support for a central, state-owned firm like China Huarong would have deep repercussions for the broader dollar bond market.

The company is majority owned by China’s Ministry of Finance and is deeply intertwined with the US$54 trillion financial industry.

The firm’s dollar bonds sank on Tuesday after Reorg Research reported regulators are considering options for the company that include restructuring the debt of Huarong International.

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