China Huarong Delays 2020 Results Past April Deadline
(Bloomberg) -- China Huarong Asset Management Co. said its 2020 earnings results would be delayed past an April 30 deadline, potentially further fraying investors’ nerves after mounting worries over potential defaults by the state-owned bad-debt manager caused a meltdown in its bonds.
The company’s auditors need more time to finalize an unspecified transaction before it can publish the results, according to a statement posted on Chinamoney.com, which is run by China Foreign Exchange Trade System. Huarong reiterated that its operations are stable and all lines of business are running normally.
The firm, China’s largest distressed-asset manager, missed an earlier March 31 deadline to announce preliminary results, also saying that its auditors needed more time. The company’s shares have been suspended since April 1.
China Huarong’s initial delay of the announcement stoked concerns over its financial health and kicked off an almost two-week plunge in its dollar bonds. Three major credit firms, Moody’s Investors Service, Fitch Ratings and S&P Global Ratings, have put the company’s debt rating on review for a potential downgrade.
The issuer’s 5.5% dollar bond due 2025 is indicated at 80 cents on the dollar, while the 4.5% perpetual note is indicated at 73 cents, Bloomberg-compiled prices show.
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The Hong Kong stock exchange, where the shares are listed, has a deadline of April 30 for companies to file final 2020 results. Trading in China Huarong’s shares won’t resume until it it provides a financial update. In some extreme cases, Hong Kong’s stock exchange can cancel listings if shares are suspended for a prolonged period.
Market worries eased after reports that Huarong made moves to pay off bonds maturing in April. Earlier, Bloomberg reported that the company proposed a sweeping overhaul which includes offloading its unprofitable, non-core businesses to revive profitability and avoid the need for a debt restructuring.
China’s Ministry of Finance, Huarong’s biggest shareholder, is considering transferring its ownership stake to Central Huijin Investment Ltd., a unit of the nation’s sovereign wealth fund, a person familiar with the matter told Bloomberg earlier this month.
China is also considering a plan that would see the central bank assume more than 100 billion yuan ($15.4 billion) of assets from China Huarong to help the company clean up its balance sheet, Bloomberg reported last week.
Huarong is one of four state-owned entities set up by China in 1999 to help manage bad debt in the country’s banking system. The firm listed in Hong Kong after a $2.5 billion initial public offering in 2015, giving it a market value of more than $15 billion. Its shares last traded at a third of that.
Under former Chairman Lai Xiaomin, Huarong expanded into areas including securities trading, trusts and other investments, deviating from the original mandate of disposing of bad debt. But it has faced challenges since Lai came under investigation in 2018. He was executed earlier this year for bribery after a brief trial, an unusually harsh sentence for such a crime.
The company owes bondholders the equivalent of $41.8 billion, with $16.9 billion of that falling due by the end of next year, according to data compiled by Bloomberg. Huarong reported a 92% drop in net income for the first half of 2020 as the value of some assets fell in wake of the Covid-19 pandemic.
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