CORRECTED-Moody's downgrades China Huarong, cites $16 billion loss
(Corrects description of China Huarong in first paragraph)
SHANGHAI, Aug 24 (Reuters) – Moody’s Investor Service on Monday cut credit ratings for Chinese state-owned bad loan giant China Huarong Asset Management Co, citing the company’s warning that it expects to book a net loss of nearly $16 billion for 2020.
Huarong said last week its 2020 net loss would be 102.9 billion yuan ($15.88 billion), due to what it said was a large change in provision for credit impairment, and said a state consortium led by the Citic Group Corp had agreed to make a strategic investment in the company.
The company had missed a March 31 deadline for filing its 2020 earnings, sparking a rout in its U.S. dollar-denominated bonds that spread to other Chinese issuers.
In a statement late on Monday, Moody’s said it had downgraded Huarong’s local and foreign currency long-term issuer ratings by one notch to Baa2 from Baa1. The ratings remain on review for further downgrades, it said.
Moody’s also downgraded the long-term backed senior unsecured debt ratings for Huarong’s offshore financing vehicles by one notch to Baa3 from Baa2. Baa3 is the lowest investment-grade rating on the Moody’s long-term issuer rating scale.
“Today’s rating actions reflect the deterioration of Huarong AMC’s capital and profitability due to large amounts of net losses incurred in 2020 … Such net losses could result in a failure to comply with the minimum regulatory requirements on capital adequacy and leverage, and indicate that the company cannot sustain its operation without support arranged by the government,” Moody’s said.
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