The Chinese finance ministry is considering a plan to transfer its shares in China Huarong Asset Management Company and three other bad-debt managers China Cinda Asset Management Co., China Great Wall Asset Management Co. and China Orient Asset Management Co. into a new holding company as per a source. This proposal was first made three years ago and is being re-examined in discussions on dealing with financial risks associated with Huarong. The source said that some officials viewed the creation of a holding company as a step toward separating the government’s roles as a regulator and shareholder, streamlining oversight and instilling a more professional management culture at Huarong and its peers. They have also discussed on whether to bring more external investors and thereby reducing the finance ministry’s controlling stakes. The finance ministry holds a 57% stake in Huarong and has neither committed to recapitalizing the company nor ruled it out. According to Bloomberg, the bad-debt managers have ~$50bn in dollar bonds outstanding and need to refinance/repay $4.9bn of bonds due through this year-end.
Most of Huarong’s dollar bonds were higher with its 4.25% 2027s up 0.6 to 67.6, yielding 11.6% and its 1.32% 2022s up 1.1 to 73.4, yielding 23.6%.
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