China Huarong, a financial institution with the Chinese Ministry of Finance as its major shareholder, was sentenced to death for alleged bribery early this year, during which the group’s debt crisis broke out one after another, and the announcement of its results was originally postponed indefinitely at the end of last month. Until recently, the market rumors that China Huarong may end up in bankruptcy.
On Tuesday (13) in Hong Kong trading session, China Huarong bond price record low, the rating agency Moody’s then put Huarong on the downgrade watch list. Some domestic US dollar bonds also saw the biggest drop ever, dragged down by the fall of Huarong bonds.
Caixin Media and “Caixin Weekly” editor-in-chief Ling Hua Wei’s latest commentary inferred that Huarong is basically a large and medium-sized institutional investors, “if bankruptcy than the bank is much better to do”. The commentary also pointed out that Huarong is not a systemically important institution according to the central bank, so if it cannot be resolved at the shareholder level and becomes insolvent, “promoting debt restructuring or even bankruptcy is a possible outcome.
Bloomberg quoted people familiar with the matter as saying that China’s Ministry of Finance, which holds 61 percent of Huarong, is considering transferring its stake to Central Huijin, a subsidiary of sovereign wealth fund China Investment Corp.
According to Huarong’s latest interim results report last year, the company’s total assets reached 1.7 trillion yuan at the end of June, while its liabilities amounted to 338.857 billion yuan in debts and notes payable. It is estimated that Huarong and its subsidiaries have a combined bond balance of more than 350 billion yuan in domestic and overseas.
Huarong was formerly known as China Huarong Asset Management Company, which was established in 1999 specifically for the disposal of ICBC’s non-performing assets, and has since developed into a large financial group with banking, securities, trust and other financial licenses.
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