Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE:  Intouch, Toshiba, Orocobre/Galaxy, Tilt, Primewest/Centuria, Huarong

China Huarong Asset Management / Event-Driven

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<a href="https://www.smartkarma.com/entities/china-huarong-asset-management" target="_blank" data-smartkarma-citation="entities:968:1" rel="noopener">China Huarong Asset Management (2799 HK)</a> was<a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0401/2021033101720.pdf" target="_blank" rel="noopener"></a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0401/2021033101720.pdf" target="_blank" rel="noopener">suspended</a> on the 1 April 2021 after failing to despatch its 2020 annual report. It remains suspended.
Yet the bigger issue was the distressed asset manager's US$22bn of dollar-denominated bonds. 
A damaging commentary from Caixin Media last week speculating of a possible bankruptcy sent some of Huarong's bonds into free fall. The near-dated 2022 bonds touched a low of 67.7 cents. The 4.5% perps dipped below 50 cents.
The 2022 3.375% bonds
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/202/156/original/image_18891551441619084449487.png?1619084450" class="editor-image img-responsive" data-smartkarma-image-id="202156"></figure>
The 4.5% perpetual bonds
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/202/155/original/image_58242332231619084400903.png?1619084401" class="editor-image img-responsive" data-smartkarma-image-id="202155"></figure>
In <a href="https://skr.ma/Q1rV4" target="_blank" rel="noopener">China Huarong Asset Management (2799 HK): This Is Manageable</a>, I reckoned a systematic restructuring process was a more likely outcome here as opposed to a less-than-optimal major debt restructuring.
Reportedly the central bank is now considering taking on RMB100bn of assets from Huarong, towards refocusing the company on distressed debt. Under "recently departed" Lai Xiaomin, Huarong expanded well beyond its original mandate of managing distressed debt.
I thought the bonds at ~70c looked interesting. That was the right call though it has been bumpy.
More below the fold.
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<hr>
The title hijacks Wellington's comment about Waterloo, wherein he said: "A damned nice thing ... the nearest-run thing you ever saw in your lif


China Huarong Asset Management (2799 HK) was suspended on the 1 April 2021 after failing to despatch its 2020 annual report. It remains suspended.
Yet the bigger issue was the distressed asset manager's US$22bn of dollar-denominated bonds. 
A damaging commentary from Caixin Media last week speculating of a possible bankruptcy sent some of Huarong's bonds into free fall. The near-dated 2022 bonds touched a low of 67.7 cents. The 4.5% perps dipped below 50 cents.
The 2022 3.375% bonds

The 4.5% perpetual bonds

In China Huarong Asset Management (2799 HK): This Is Manageable, I reckoned a systematic restructuring process was a more likely outcome here as opposed to a less-than-optimal major debt restructuring.
Reportedly the central bank is now considering taking on RMB100bn of assets from Huarong, towards refocusing the company on distressed debt. Under "recently departed" Lai Xiaomin, Huarong expanded well beyond its original mandate of managing distressed debt.
I thought the bonds at ~70c looked interesting. That was the right call though it has been bumpy.
More below the fold.


The title hijacks Wellington's comment about Waterloo, wherein he said: "A damned nice thing ... the nearest-run thing you ever saw in your lif

China Huarong Asset Management (2799 HK): Not A Near Run Thing

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

China Huarong Asset Management / Equity Bottom-Up

*Another Potential Default:  Again in mainland China, there have been rumblings of another credit default over the past several days. The CBIRC disclosed that China Huarong Asset Management (2799.HK) [Huarong] is actively working with its auditor to complete its annual report. The issue appears to be Huarong’s legacy exposure associated with the misdeeds of its former Chairman, which still need to be addressed post-removal in 2018; and *Ratings Agencies Are More Than Culpable: Wouldn’t you know it, the sleepy, fee hungry ratings agencies (Standard &amp; Poors, Moody’s, and Fitch Ratings) finally put Huarong on review for a potential downgrade. C’mon guys, where have you been?

*Another Potential Default:  Again in mainland China, there have been rumblings of another credit default over the past several days. The CBIRC disclosed that China Huarong Asset Management (2799.HK) [Huarong] is actively working with its auditor to complete its annual report. The issue appears to be Huarong’s legacy exposure associated with the misdeeds of its former Chairman, which still need to be addressed post-removal in 2018; and *Ratings Agencies Are More Than Culpable: Wouldn’t you know it, the sleepy, fee hungry ratings agencies (Standard &amp; Poors, Moody’s, and Fitch Ratings) finally put Huarong on review for a potential downgrade. C’mon guys, where have you been?

China Huarong Asset Management  - Ratings Agencies Fail Us Again

Last Week in Event SPACE: Toshiba, Grab, Huarong, Invesco Office, Intouch, Jardines

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Uncertainty at <a href="https://www.smartkarma.com/entities/china-huarong-asset-manageme" target="_blank" data-smartkarma-citation="entities:28089:1" rel="noopener">China Huarong Asset Management (HUAZ CH)</a>, China’s largest distressed debt manager is causing ripples throughout Asia’s credit markets. More broadly, China’s <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> cancelled a US$4 billion bond sale due to market conditions. Specifically, Huarong contagion steepened the credit curve of China’s other asset management companies (AMCs).
At issue here are the Keepwell provisions which enable China’s banks, and non-bank finance companies to access foreign currency financing in the global bond markets. Essentially, a Keepwell provision is a pledge, not a guaranty, to keep an offshore subsidiary which issues the bonds solvent in the event of distress.
The immediate risk is that Huarong’s offshore issuance vehicles are not supported in any restructuring. Orphaning the Keepwell provisions would destroy an important component of AMC funding. The damage here would extend beyond AMCs to other non-bank finance companies, including leasing companies and other entities owned by China’s banks. Not supporting these securities could all but eliminate China Inc.’s access to the global bond markets.
Concurrently, price action in the bond market suggests concern with the long-term viability of the AMC model rather than jump to default risk. We are not convinced this is appropriate and recommend Overweighting other AMC bonds.
Although the former top executive was put to death, Huarong bondholders need not be. Nonetheless, the walk to the gallows can be harrowing and uncertainty is high. There is likely more than meets the eye in this story. It is conceivable that we never see a 2020 year-end report for this state-owned enterprise. Therefore, having a strong conviction on Huarong means undertaking a leap of faith. As such, we suggest a way to trade Huarong  such that downside is limited; however, our preference is to trade the contagion.

Uncertainty at China Huarong Asset Management (HUAZ CH), China’s largest distressed debt manager is causing ripples throughout Asia’s credit markets. More broadly, China’s Tencent Holdings (700 HK) cancelled a US$4 billion bond sale due to market conditions. Specifically, Huarong contagion steepened the credit curve of China’s other asset management companies (AMCs).
At issue here are the Keepwell provisions which enable China’s banks, and non-bank finance companies to access foreign currency financing in the global bond markets. Essentially, a Keepwell provision is a pledge, not a guaranty, to keep an offshore subsidiary which issues the bonds solvent in the event of distress.
The immediate risk is that Huarong’s offshore issuance vehicles are not supported in any restructuring. Orphaning the Keepwell provisions would destroy an important component of AMC funding. The damage here would extend beyond AMCs to other non-bank finance companies, including leasing companies and other entities owned by China’s banks. Not supporting these securities could all but eliminate China Inc.’s access to the global bond markets.
Concurrently, price action in the bond market suggests concern with the long-term viability of the AMC model rather than jump to default risk. We are not convinced this is appropriate and recommend Overweighting other AMC bonds.
Although the former top executive was put to death, Huarong bondholders need not be. Nonetheless, the walk to the gallows can be harrowing and uncertainty is high. There is likely more than meets the eye in this story. It is conceivable that we never see a 2020 year-end report for this state-owned enterprise. Therefore, having a strong conviction on Huarong means undertaking a leap of faith. As such, we suggest a way to trade Huarong  such that downside is limited; however, our preference is to trade the contagion.

China Huarong: Contagion Creates Opportunity

China

China Huarong Asset Management Co Ltd. provides a variety of financial services. The Company offers asset management, banking, securities services, financial leasing, trust services, and investment services. China Huarong Asset Management maintains branch locations throughout China.

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China Huarong Asset Management (2799 HK)

Last Week in Event SPACE: Intouch, Toshiba, Orocobre/Galaxy, Tilt, Primewest/Centuria, Huarong

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett