China’s stressful Huarong loses 15 billion U.S. dollars

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China Huarong Asset Management Co., Ltd. update

Huarong Asset Management has announced investment agreements with Chinese companies, including state-backed CITIC, because the pressured bad debt management company announced a loss of more than 100 billion yuan ($15.4 billion) last year.

The company said on Wednesday evening that CITIC, Cinda Asset Management, China Insurance Investment, China Life Asset Management and Sino-Ocean Capital, which are also bad debt managers, intend to make strategic investments.

The announcement is a breakthrough for China’s largest distressed debt investor. Into chaos After failing to release annual financial results in April.

The heavy losses confirmed people’s concerns about the company’s financial loopholes. The long wait for information has sparked a debate about the extent to which the Chinese government will support its company and its offshore bondholders, exacerbating unease in the Asian credit markets, and Huarong has borrowed more than US$20 billion.

Lai Xiaomin, the company’s former chairman, was responsible for active expansion in China and internationally for a period of time. Executed for financial crimes In January.

The Chinese government holds a majority stake, but its investors, including Huarong of the international private equity group Warburg Pincus Investment Group, said that according to unaudited financial data, its total loss in 2020 is 102.9 billion yuan. In 2019, it achieved a net profit of 1.4 billion yuan.

Huarong attributed its losses to the former chairman and the blow of the coronavirus pandemic, saying that this caused the quality of certain assets to “deteriorate” more quickly.

“In 2020, as the former chairman of the board of directors Lai Xiaomin held a court sentence on the crimes of bribery, corruption, and bigamy, the group will continue to clean up and dispose of risky assets brought about by radical operations and disorderly expansion during his tenure.” Exchange documents.

The international bond market, where Huarong borrowed to promote its overseas investment, paid close attention this week to the company’s shareholders meeting held on Tuesday.

After that vote, it obtained shareholder approval to exit its consumer finance business, one of its non-core departments. Huarong was also approved to appoint a new president Liang Qiang, who was recently promoted to head of another bad debt investor, Great Wall Asset Management.

The expectation of the restructuring triggered a sell-off of Huarong’s bonds, and its Hong Kong-listed shares were still suspended from trading after the announcement this week.

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