China Huarong in Talks With Investors After $16 Billion Loss

By Reuters
Reuters
Reuters
August 30, 2021 Updated: August 30, 2021

SHANGHAI—China Huarong Asset Management Co., Ltd., a state-owned asset management company, sought to turn the page on a deep annual loss on Aug. 30, as its chairman said it was in talks with potential new strategic investors alongside a CITIC-led (CITIC Group Corporation Ltd., a state-owned investment company) consortium.

Wang Zhanfeng, on a call a day after releasing earnings results, said many investors continue to have faith in Huarong and that it was speaking with new potential domestic and foreign strategic investors.

On Aug. 29, Huarong announced a first-half 2021 profit of $24.5 million and a nearly $16 billion loss for 2020. Restructuring uncertainties delayed its annual results statement by nearly five months.

Earlier in August, the indebted company informed investors of a state-backed rescue plan led by the CITIC Group Corp.

The deal would make Huarong a subsidiary of CITIC Group, part of a plan by regulators to fold financially shaky state asset managers into financial holding groups, according to two sources familiar with the restructuring process.

Huarong is one of four distressed state-owned debt managers and counts China’s finance ministry as its largest shareholder.

“We need to turn from quick profits to long-term profits to hard-earned profits,” Liang Qiang, executive director of Huarong, said on the earnings call, alluding to the company’s rapid expansion under its former chairman Lai Xiaomin.

Lai was executed in January, following one of China’s highest-profile corruption cases.

Huarong executives emphasized that a more stable outlook for the company will require focusing on its core business. They said the company’s offshore unit, Huarong International, would remain a strategic platform. They believe that it will continue to improve its asset structure and that its financial indicators will recover.

In its half-year report, China Huarong listed liabilities totaling $238 billion, including $16.5 billion in bond payables and $89.4 billion in borrowings falling, both due within one year. It said certain regulatory indicators, including its capital adequacy ratio and leverage ratio, failed to reach minimum regulatory requirements.

On Aug. 30, Huarong executives said the company would decide whether to roll out a refinancing plan for dollar-denominated debt based on its credit recovery process, its operational and developmental needs, and regulatory approval.

A decision on whether to buy back outstanding perpetual bonds would also be based on the operational situation of subsidiary China Huarong International Holdings Ltd., as well as contracts and deals made with creditors, they said.

The mid-price on 4 percent perpetual bonds issued by subsidiary Huarong Finance 2017 Co. Ltd. rose by about 1 cent to $94.781 following the call, according to data from Duration Finance, compared with a low of less than 53 cents in May.

By Andrew Galbraith

Reuters
Reuters