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China Huarong’s journey, from safe bet to bad news: a timeline

(Bloomberg) – It has been nearly two months since turmoil erupted around China Huarong Asset Management Co. At the end of March, its 4% perpetual bond in dollars was trading at 102 cents to the dollar as investors thought about it. The January execution of former President Lai Xiaomin for corruption puts a line under past capricious behavior. But the company’s failure to release 2020 results before the March 31 deadline, and a subsequent report from mainland media Caixin that the company will restructure, sparked weeks of unrest. The same bond is now at 57 cents. The crux of the matter is whether the central government will rescue a state-owned enterprise that is integral to the proper functioning of the financial system. Although there are signs that Beijing wants to ensure that China Huarong can repay its debts on time, uncertainty prevails. Here’s a look at key events for China Huarong: May 28 The company wired funds to repay $ 978 million in notes maturing the following week, according to Bloomberg News, the largest bond payment since earnings reported. 2020 May 27 Liang Qiang, who currently heads another bad debt manager, is on track to become chairman of China Huarong, Bloomberg News reports. May 24 China Huarong’s dollar bonds climb after management Caixin Media editor-in-chief wrote in an opinion piece that the asset manager is “far from” in default on its more than $ 20 billion in offshore banknotes. notes, signaling growing concern about the financial health of the company. May 18, China Huarong transferred funds to repay a $ 300 million note due May 20, Bloomberg News reports, the first dollar bond to mature since the delayed 2020 results. The prices of the company’s dollar bonds fell earlier in the day after the New York Times reported that China is considering an overhaul that would inflict “significant losses” on domestic and foreign Chinese Huarong bond holders. May 17 The company has entered into financing deals with state-owned banks to ensure it can repay its debt at least until the end of August, when China Huarong aims to complete its 2020 financial statements, according to a Bloomberg News report. That at least two of its onshore bonds have seen sharp price declines in recent days, which worries some investors. May 13 The company says it is ready to make future bond payments and has seen no change in the level of government support, seeking to allay investor concerns after local media reports that regulators have hesitated over the plan. restructuring of China Hurarong. May 6 The company said it transferred funds to pay off five offshore bond coupons due the next day, its latest move to honor its debts amid lingering doubts over its financial health. his silence, with an executive telling the media that he is ready to pay his obligations and state support remains intact. The official also said the week’s rating downgrades “have no factual basis” and are “too pessimistic”. April 29 Moody’s Investor Service downgrades China Huarong a notch to Baa1, adding that the company remains on the lookout for further downgrade. The reduction reflects the company’s weakened financing capacity due to market volatility and increased uncertainty about its future, the statement said. April 27, China Huarong units redeem bonds maturing that day. The S $ 600 million ($ 450 million) bond was repaid with funds provided by China’s largest state bank, according to a Bloomberg News report. On April 26, Fitch Ratings downgraded China Huarong three notches to BBB while dropping the company’s perpetual bonds into junk territory. The lack of transparency about the government’s support for the company could hamper its ability to refinance its debt in offshore markets, Fitch said. April 25, China Huarong said it would not meet the April 30 deadline to file its 2020 report with the Hong Kong Stock Exchange because auditors needed more time to complete a transaction the company reported to the first time on April 1. Securities and asset management units have said in previous days that they will not release 2020 results by the end of the month. April 22 China’s Banking and Insurance Regulatory Commission asks lenders to extend China’s upcoming Huarong loans by at least six months, according to REDD, citing two bankers from major Chinese commercial lenders. On April 21, China is considering a plan that would see its central bank assume more than 100 billion yuan ($ 15 billion) in assets from China Huarong to help clean up the company’s balance sheet, according to a Bloomberg News report. Peer China Cinda Asset Management Co. reportedly expects the sale of perpetual bonds in the second quarter. April 20 China Huarong’s main offshore finance unit said it had returned to profitability in the first quarter and laid a “solid” foundation for the transformation. Reorg Research reports that regulators are considering options, including a debt restructuring of the unit, China Huarong International Holdings Ltd. April 19, Huarong Securities Co. says it wired funds to repay a local 2.5 billion yuan note. April 16 The CBIRC says China Huarong’s operations are normal and the company has sufficient liquidity. These are the first official comments on the company’s problems. Reuters reports that Chinese banks have been told not to withhold loans to Huarong. On April 13, Fitch and Moody’s both put the company under review for downgrading. The finance ministry, which holds a majority of Huarong, is considering transferring its stake to a unit of the country’s sovereign wealth fund, Bloomberg News reports. Chinese officials are signaling that they want failed local government funding vehicles to restructure or go bankrupt if debts cannot be repaid. April 9, China Huarong says it has paid off its debts “on time” and that its operations are “normal.” Bloomberg News reports that the company intends to keep Huarong International as part of a potential overhaul that would avoid the need for debt restructuring or government recapitalization. S&P Global Ratings is putting China Huarong’s credit ratings on watch for possible downgrade. April 8 China Huarong prepares to get rid of non-core and loss-making units as part of a sweeping profitability stimulus package that would avoid the need for debt restructuring or government recapitalization, Bloomberg News reports . April 6 Selling gathers momentum in China Huarong dollar bonds after a holiday in China. Huarong Securities says there has been no major change in its operations, in response to the price of its local bond falling by 3 billion yuan. Equity trading is on hold and spreads are climbing on the company’s dollar bonds as China Huarong tells investors that its business is business as usual. Caixin reports that the company has submitted restructuring plans and other major reform plans to government officials and shareholders.

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