Caixin
May 19, 2021 03:00 AM
FINANCE

Exclusive: Huarong Gets New President Amid Pressure on Bonds

Liang Qiang
Liang Qiang

China’s embattled bad-asset manager China Huarong Asset Management Co. Ltd. is getting a new president, filling a nearly six-month vacancy as the state-owned company’s bonds come under pressure amid closer scrutiny by investors.

Liang Qiang, a former deputy Communist Party chief and executive director at China Great Wall Asset Management Co. Ltd., was named Huarong’s next president and will start his duties soon, Caixin learned from people familiar with the matter.

Huarong’s domestic and offshore bonds fell again Tuesday following a media report that China is planning an overhaul of the company that will lead to significant losses to Huarong’s domestic and foreign bondholders. A timetable for a full overhaul has not yet been set, The New York Times reported.

Huarong’s dollar bonds extended the past week’s declines, with the 5.5% bond due 2025 dropping 3.3 cents on the dollar to 70.8 cents and the 4.5% perpetual note sliding 3.7 cents to 59 cents, Bloomberg data showed.

However, sources close to the company told Caixin that Huarong pledged in a meeting Tuesday to reassure bondholders. The company has prepared needed capital to repay maturing offshore debts, the sources said.

Market concerns over Huarong’s financial health have mounted after the company missed a March 31 deadline to report 2020 results, triggering a record selloff of its bonds. Speculation has swirled since early April about a potential debt restructuring of Huarong, which is controlled by the Ministry of Finance.

Moody’s Investors Service and Fitch Ratings downgraded the business’s credit ratings amid a lack of visibility over the central government’s support.

Huarong doesn’t intend to default and has “ample liquidity,” said a person close to the company. “Recent bond market fluctuation reflects a mismatch of information,” the person said.

Huarong had $22 billion of outstanding offshore bonds as of late April, $3.4 billion of which come due by the end of this year, according to Bloomberg data.

The post of president, the second-most senior management position after the chairman, has been vacant since December when former President Li Xin retired.

Liang, 50, was named to the post shortly before the May Day holiday, Caixin learned. His appointment surprised many in the market as it came only four month after he was named deputy party chief of Great Wall.

“Many in the market believed Liang would eventually become the president of Great Wall,” one person said.

Liang has extensive experience in China’s national asset management companies (AMCs). Before joining Great Wall, he was a vice president of China Orient Asset Management Corp., overseeing the company’s bad-loan and financing businesses. Before that, he spent 20 years at another national AMC — China Cinda Asset Management Co. Ltd.

Huarong also named Xu Yongli, a former China Orient executive, as a vice president. Meanwhile, Hu Jiliang, a former Huarong vice president, was transferred to China Cinda as a vice president, Caixin learned.

Huarong, one of four national AMCs set up by the Chinese government in 1999 to tackle nonperforming assets of state banks, has been shaken since the downfall of its former Chairman Lai Xiaomin, who was executed in January for crimes including bribery.

On Lai’s watch, Huarong expanded into areas including securities trading, trusts and other investments, deviating from the original mandate of disposing of bad debt. But the aggressive expansion through murky business with affiliated companies left Huarong with hundreds of billions of yuan of unresolved bad debt.

Since Lai’s downfall, Huarong has started trimming noncore assets amid regulatory pressure to return to its roots. Net income slumped 92% in the first half of 2020 from a year earlier as the value of some assets dropped amid the Covid-19 pandemic. The company’s market value tumbled to about $5 billion from $15 billion when it listed. Trading of Huarong’s shares in Hong Kong has been suspended since April 1.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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