CHINA CREDIT WRAP: Huarong’s Bond Selloff Reaches Onshore Market

Onshore investors showed their first sustained concerns about China Huarong Asset Management this week, with some onshore bonds slumping as the market digested the latest reports on the firm’s possible fate.

  • Some thinly traded yuan-denominated bonds fell sharply Thursday, raising the risk of a lack of confidence among mainland investors after such debt held up in April as dollar bonds slumped
  • The company’s dollar bonds sold off Tuesday after a New York Times report said China’s government is “strongly committed” to making sure both foreign and domestic bondholders don’t receive full repayment of their principal
  • Continued official silence from Beijing on what might happen to Huarong is stoking renewed volatility in the company’s bonds as traders juggle competing narratives about the prospect of a debt restructuring
  • Meanwhile, Bloomberg reported Huarong has reached funding agreements with state-owned banks to ensure it can repay debt through at least the end of August as the firm repaid a maturing $300 million bond
CHINA CREDIT WRAP: Huarong’s Bond Selloff Reaches Onshore Market

Other News:

  • Haitong International Securities, a top arranger for Chinese junk dollar bonds, is trying to win over more sovereign and high-yield borrowers in Asia in light of rising domestic competition and regulatory scrutiny
  • Government focus on developers using secretive funding is adding pressure to the nation’s cash-strapped builders and threatens to curb growth
  • Global banks are losing share in the $186 billion loan market for Chinese borrowers offshore, falling behind local rivals

Credit Spreads:

SpreadsThursday, May 20Friday, May 14
5-Year AAA Rated Corporate Bond7269
5-Year AA Rated Corporate Bond151148
3-Year AAA Rated Corporate Bond6266
3-Year AA Rated Corporate Bond131134

New Issues:

  • Great Wall Securities, Shenwan & Hongyuan Securities, Ping An Real Estate and OCBC Wing Hang Bank China are expected to issue bonds next week. Click here for China bond pipeline
  • Weekly yuan-denominated corporate bond sales grew 84% to 204.19b yuan, according to data complied by Bloomberg
  • After no Chinese companies canceled a bond sale last week, China Reform Commercial Factoring scrapped a 500 million yuan deal this week

Rating Changes:

  • Baoji Investment Group Co.
    • Fitch’s Long-Term Issuer Default Rating was downgraded to BB+ from BBB-
    • Fitch’s Long-Term Local Currency Issuer Default Rating was downgraded to BB+ from BBB-
  • Jinan Hi-tech Holding Group Co.
    • Fitch’s Long-Term Issuer Default Rating was newly assigned at BBB
    • Fitch’s Long-Term Local Currency Issuer Default Rating was newly assigned at BBB
  • Landsea Green Properties Co.
    • Fitch’s Long-Term Issuer Default Rating of B was withdrawn
  • Golden Wheel Tiandi Holdings Co.
    • Fitch’s Long-Term Issuer Default Rating of CCC+ was withdrawn
    • Fitch’s Long-Term Local Currency Issuer Default Rating of CCC+ was withdrawn
  • Shanxi Yuci Rural Commercial Bank Co.
    • Chengxin’s Long-Term Local Currency Issuer Rating was downgraded to A- from A+ and on negative watch
  • Wens Foodstuffs Group Co.
    • S&P’s Long-Term Local Currency Issuer Credit Rating was downgraded to BBB- from BBB
    • S&P’s Long-Term Foreign Currency Issuer Credit Rating was downgraded to BBB- from BBB
  • Golden Eagle Retail Group
    • Fitch’s Long-Term Issuer Default Rating was upgraded to BB+ from BB
  • Zhongyu Gas Holdings
    • Moody’s Long-Term Corporate Family Rating was newly assigned at Ba3
    • Fitch’s Long-Term Issuer Default Rating was newly assigned at B+
  • Jiangsu Shagang Group Co.
    • Fitch’s Long-Term Issuer Default Rating was newly assigned at BBB-
    • S&P’s Long-Term Local Currency Issuer Credit Rating was newly assigned at BBB-
    • S&P’s Long-Term Foreign Currency Issuer Credit Rating was newly assigned at BBB-

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