Moody’s, one of the top three international rating agencies, has placed China Huarong’s A3 long-term issuer rating, its P-2 short-term issuer rating and its b1 underlying credit assessment (BCA) on a downgraded watch list in its latest report, stating that the potential impact on Huarong’s creditworthiness is uncertain due to the delay in the release of Huarong’s 2020 annual results and the lack of clarity on the details of the related transactions.
Moody’s placed Huarong’s rating on a downgraded watch list, according to a press release from Moody’s quoted by Reuters today, “as there are a number of different scenarios that could impact Huarong’s BCA and potential government support.” Moody’s also placed the bond rating and medium-term note program rating of Huarong’s offshore financing instruments on a watch list for downgrade.
Earlier this month, China Huarong announced a suspension of trading and a delay in publishing its 2020 annual results; the company’s executives also held a brief conference call to explain that the auditors needed more information and time to complete the review process regarding the 2020 annual results as the relevant transactions were yet to be finalized.
Moody’s noted that market volatility following Huarong’s announcement could raise the company’s refinancing risk. The amount of bonds maturing in the next 12 months is not material compared to the size of the company’s assets, which partially mitigates the associated risk. Huarong is highly dependent on confidence-sensitive wholesale funding to support its assets.
Moody’s also addressed the fact that Huarong’s rating is unlikely to be upgraded in the next 12-18 months given that it is on the watch list for downgrade.
S&P Global Ratings, one of the three major international rating agencies, issued a report on Friday placing the long-term debt ratings of Huarong and its subsidiaries – Huarong Financial Leasing, Huarong International and Huarong National – “BBB+” on the negative credit watch list for bonds guaranteed by Huarong.
As of June 30, 2020, Huarong’s consolidated assets stood at 1,732 billion yuan, the report said.
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