Chinese regulators have asked some banks not to withhold loans to wealth management giant China Huarong Asset Management Co, as part of support measures to stabilize their position. Their cash flow, sources told Reuters.
Huarong, one of the four largest asset management firms in China (AMC), which considers the Ministry of Finance the largest shareholder, has been affected by the offshore bond sale and the stock has been suspended since. March 31, after the earnings announcement was delayed. report due to “related transaction” has not been completed.
It was the latest incident in troubles for debt manager, whose failed investments and business expansion have forced it to negotiate a restructuring since 2018 and Chairman Lai Xiaomin of he was executed in January following a transplant investigation.
According to Refinitiv data, Huarong and its subsidiaries now have outstanding offshore bonds worth $ 22.39 billion, with about $ 3.57 billion of which will mature by 2021.
The latest measures are prompted by financial regulators to stop the spread and ensure Huarong’s domestic cash situation is stable, according to four sources including Huarong’s creditors and those have direct knowledge of a company’s asset restructuring plan.
Several state-owned banks have also been notified to be willing to assist Huarong, one of the four sources said, without elaborating.
Investors are concerned that any corporate debt restructuring could leave their US dollar bond holders unprotected and compel a costly reassessment of their own long-term support. Government for China’s state-owned issuers.
Market concerns swept to other issuers and lifted insurance costs on defaulted Chinese dollar debt to the highest level since October.
Support comes as Huarong prepares to repay 2.5 billion yuan ($ 382.84 million) of land-traded bonds maturing April 18, though investors are not expecting. The company will get stuck with that bond.
Yield on that instrument was at 4,293% on Friday, down from 4.365% on March 31, according to Refinitiv data.
Huarong repaid two maturing domestic corporate bonds totaling 3.1 billion yuan on March 15.
The company is also looking at the ability to repay due external debts with domestic funds, a measure requiring final coordination and approval from the Ministry of Finance and the country’s foreign exchange regulator. , one of the sources said.
The sources could not be identified as the information was not yet widely publicized and they were not authorized to speak to the media.
The Ministry of Finance, the People’s Bank of China, and other banking and foreign exchange regulators did not respond to requests for comment. There was also no immediate response from Huarong.
The China Insurance and Banking Regulatory Commission (CBIRC) said in a press conference with the media that mainland asset management companies are operating normally and their ratios are stable.
Huarong’s troubles began in 2018 after then-president Lai was targeted for an anti-corruption investigation and convicted by a local court in the country’s largest financial corruption case since his inception. The People’s Republic of China was established in 1949.
Since its collapse, Huarong has had a restructuring plan to tackle the massive debt build-up through investments under Lai’s tenure.
As of mid-2020, Huarong has a net asset of 160 billion yuan and more than 30 billion yuan of provision for loan losses.
($ 1 = 6,5301 yuan)