Moody’s Seeks Control of China’s Biggest Rating Firm
Moody’s has reached a framework agreement to increase its holding in Chengxin to more than 50 percent, from 30 percent.
(Bloomberg) -- Moody’s Corp. is pursuing a deal that would give it control of China Chengxin International Credit Rating Co., the nation’s largest ratings company, people with knowledge of the matter said.
Moody’s has reached a framework agreement to increase its holding in Chengxin to more than 50 percent, from 30 percent, the people said. The companies have approached the People’s Bank of China for feedback on the plan, according to the people, who asked not to be identified as the information is private.
Global rating firms are rushing to enter what will soon be the world’s second-largest bond market after the PBOC eased requirements last year. S&P Global Ratings in January became the first foreign ratings company to get regulators’ approval for its local unit to grade Chinese domestic bonds.
Precise terms of a deal between Moody’s and Chengxin still need to be negotiated, and there’s no certainty they will proceed with a transaction, one of the people said.
The move, if completed, would be the latest instance of an international financial company taking majority control of a local Chinese venture, a key part of China’s financial opening. UBS Group AG recently took a majority stake in its onshore securities venture, while on Friday, Mastercard Inc. agreed to set up a bank card clearing company with NetsUnion Clearing Corp., with the New York-based firm holding 51 percent of the business.
Yi Gang, PBOC governor, said at a press conference during the National People’s Congress in Beijing on Sunday that China had met most of the financial opening aims it had announced last year. Yi cited S&P Global’s move as an example of the successful efforts.
Beijing-based Chengxin, established in 1992, was the first jointly-owned credit rating company approved by the central bank. It has since become China’s largest in terms of market share on bonds graded and ranked No. 4 in the world, according to its website.
Representatives for Moody’s and Chengxin declined to comment. The PBOC didn’t reply to faxed queries.
The Chengxin stake held by Moody’s was diluted in 2017 to 30 percent, from 49 percent, following a restructuring. At the time, Moody’s said its investment in the company hadn’t reduced and denied that the move was preparation for an independent onshore rating business. Moody’s has registered two wholly-owned entities in Beijing and Shanghai.
--With assistance from Vinicy Chan, Heng Xie and Davide Scigliuzzo.
To contact Bloomberg News staff for this story: Evelyn Yu in Shanghai at yyu263@bloomberg.net;Jun Luo in Shanghai at jluo6@bloomberg.net;Tongjian Dong in Shanghai at tdong28@bloomberg.net;Steven Yang in Beijing at kyang74@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, ;Ben Scent at bscent@bloomberg.net, Timothy Sifert
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