Huarong Puts $59 Billion in Bad Assets on Sale to Raise Cash

(Bloomberg) -- China Huarong Asset Management Co. is marketing 380 billion yuan ($58.8 billion) in bad assets for sale as the firm moves to shore up its finances after record losses. 

The assets involve more than 7,000 borrowers, the Beijing-based firm said in a statement on its website. It’s the largest size ever for a Huarong online marketing of bad assets, according to a company spokesperson.   

China’s biggest bad debt manager had roiled markets since it delayed its earnings report in March. Last month, it secured a rescue package from some of the nation’s biggest financial firms and, after a long delay, revealed a record loss of 102.9 billion yuan for 2020, slashing shareholder equity by nearly 85%. 

While it returned to a small profit in the first half this year, Chairman Wang Zhanfeng said the company will apply to the regulator for temporary tolerance with key capital measures below requirements as of June.

Huarong has said it can continue to honor local and offshore debt obligations, but its ability to do so over the longer term will depend on how much cash it can raise from asset disposals, people familiar have said. Huarong aims to raise about 50 billion yuan from asset sales, one of the people said.

Selling bad assets online has been popular among Huarong and its peers in the past few years, though the size of the current offering indicates the bad-loan manager’s need for funds. The loans are often sold at a discount of as much as 40% on the dollar. 

The firm said on Sunday that it plans to dispose of subsidiaries with non-core business activities in the “near future” to increase internally generated fund inflows and to replenish capital. It cut its non-financial local and offshore units to 13 from 27 through 2020.

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