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China Huarong’s Journey From Safe Bet to Bad News: A Timeline

(Bloomberg) – It was a turbulent April for dollar bond holders of China Huarong Asset Management Co.

In late March, the 4% perpetual dollar bond traded at 102 cents a dollar, as investors believed the January execution of former chairman Lai Xiaomin for bribery would line up the wayward behavior of the past. But the company’s failure to release its 2020 results on March 31, and a subsequent report from mainland media Caixin that will restructure the company caused weeks of unrest. The same bond is now trading at 57 cents.

The crux of the matter is whether central government will rescue a state-owned company that is integral to the proper functioning of the financial system. While there are signs that Beijing wants to ensure that China can repay Huarong on time, there is uncertainty.

Here is an overview of the main events for China Huarong:

May 18

China Huarong has transferred money to repay a $ 300 million note due May 20, Bloomberg News reports, the first dollar bond to mature since the 2020 delayed results. Prices for the company’s dollar bonds are falling earlier in the day after the New York Times reports that China is planning an overhaul that would cause “significant losses” to both domestic and foreign China Huarong bondholders.

May 17

According to a Bloomberg News report, the company has entered into financing agreements with state-owned banks to ensure it can repay its debts until at least the end of August, by which time China Huarong aims to finalize its 2020 financial statements. That, given that at least two of its onshore bonds have seen major declines in price in recent days, which is worrying some investors.

13 May

The company says it is willing to make future bond payments and has seen no change in the level of government support, in an effort to allay investor concerns following a report in local media that regulators oppose China Hurarong’s restructuring plan.

6 May

The company says it transferred money to pay for five offshore bond coupons the next day, the last step to meet debt obligations amid lingering doubts about its financial health.

The story continues

30th of April

China Huarong breaks its silence, with an executive telling the media it is willing to make its bond payments and state aid remains intact. The official also says the week’s rating downgrades “have no factual basis” and are “too pessimistic”.

April 29

Moody’s Investor Service drops China Huarong by one step to Baa1, adding that the company looks forward to a further cut. The cut reflects the company’s weakened financing capacity due to market volatility and increased uncertainty about the future, the statement said.

April 27th

China Huarong units will pay back bonds that mature that day. According to a report by Bloomberg News, the S $ 600 million ($ 450 million) bond was repaid with funds from China’s largest state-owned bank.

26 April

Fitch Ratings down China Huarong three steps to BBB, while scrapping the company’s perpetual junk bonds. The lack of transparency about government support for the company could hamper its ability to refinance debt in offshore markets, Fitch said.

April 25

China Huarong says it will not meet the April 30 deadline to file its 2020 report with the Hong Kong Stock Exchange as accountants needed more time to finalize a transaction the company first launched on April 1. marked. Securities and wealth management units said in the days before they would not publish 2020 results by the end of the month.

April 22nd

The China Banking and Insurance Regulatory Commission is asking lenders to extend China Huarong’s upcoming loans for at least six months, REDD said, citing two bankers from major Chinese commercial lenders.

April 21

According to a report by Bloomberg News, China is considering a plan whereby the central bank will acquire more than 100 billion yuan ($ 15 billion) in China Huarong assets to clean up the company’s balance sheet. Peer China Cinda Asset Management Co. would plan the sale of perpetual bonds in the second quarter.

20th of April

China Huarong’s main offshore financing unit says it returned to profitability in the first quarter and laid a ‘solid’ foundation for transformation. Reorg Research reports that regulators are considering options including a debt restructuring of the unit, China Huarong International Holdings Ltd.

April 19th

Huarong Securities Co. says it transferred money to pay back a local 2.5 billion yuan note.

April 16

The CBIRC says China Huarong’s business is normal and the company has adequate liquidity. These are the first official comments on the company’s problems. Reuters reports that Chinese banks have been asked not to withhold loans from Huarong.

13th of April

Fitch and Moody’s have both put the company on hold for a downgrade. The Treasury Department, which owns a majority of Huarong, is considering transferring its stake to a unit of the country’s sovereign wealth fund, Bloomberg News reports. Chinese officials say they don’t want the local government to finance vehicles to restructure or go bankrupt if debts cannot be repaid.

April 9

China Huarong says it has paid off debts “on time” and that its activities are “normal”. Bloomberg reports that the company plans to keep Huarong International as part of a potential overhaul that would avoid the need for a government debt restructuring or recapitalization. S&P Global Ratings is monitoring China Huarong’s credit ratings for possible downgrades.

April 8

China Huarong is preparing to lay off non-core and loss-making units as part of a comprehensive plan to restore profitability and avoid the need for a government debt restructuring or recapitalization, Bloomberg News reports.

6 April

Sales are gaining momentum in China Huarong’s dollar bonds after a holiday in China. Huarong Securities says there has been no major change in its business in response to a price drop for its 3 billion yuan local bond.

April 1st

China Huarong announces a delay in releasing the 2020 results and says its auditor cannot complete a transaction. Stock trading is suspended and spreads jump up on the company’s dollar bonds as China Huarong tells investors the company is just running. Caixin reports that the company has submitted restructuring and other major reform plans to government officials and shareholders.

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