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Rating Action:

Moody's reviews Huarong AMC's ratings for downgrade

 The document has been translated in other languages

13 Apr 2021

Hong Kong, April 13, 2021 -- Moody's Investors Service has placed the A3 long-term and P-2 short-term issuer ratings, as well as the b1 baseline credit assessment (BCA), of China Huarong Asset Management Co., Ltd. (Huarong AMC) under review for downgrade.

In addition, Moody's has placed the debt ratings and medium-term note (MTN) program ratings of Huarong AMC's offshore financing vehicles under review for downgrade. These include the Baa1 long-term backed senior unsecured debt ratings and the (P)Baa1 backed senior unsecured MTN program ratings of Huarong Finance 2017 Co., Ltd and Huarong Finance II Co., Ltd, as well as the Baa1 long-term backed senior unsecured debt rating, the (P)Baa1 long-term and (P)P-2 short-term backed senior unsecured MTN program ratings of Huarong Finance 2019 Co., Ltd.

A list of the affected ratings can be found at the end of this press release.

RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Today's rating actions reflect the uncertainty stemming from Huarong AMC's announcement on 31 March 2021 that the publication of its 2020 annual results would be delayed as a relevant transaction is still being finalised and the auditor would need more information and time to complete the necessary audit procedures[1].

It is unclear what the details of the relevant transaction are and when its 2020 annual results will be published. The potential impact on Huarong AMC's credit profile is uncertain, because there are a number of diverse scenarios that could affect its BCA and potential government support.

Moody's assesses that Huarong AMC may face increasing refinancing risk due to market volatility following its announcement, which is partially tempered by the fact that the amounts of maturing bonds over the next 12 months are not significant when compared with Huarong AMC's total assets. Huarong AMC relies heavily on confidence-sensitive wholesale funding to support its assets.

Moody's regards Huarong AMC's delayed publication of its 2020 annual results as a governance risk under our environmental, social, and governance (ESG) framework, given its implications for the company's compliance and reporting. Today's actions reflect the impact that such governance weakness can have on Huarong AMC's credit quality.

The review will focus on (1) the impact of the relevant transaction on Huarong AMC's financial position and BCA; (2) implications for the level of government support to be assumed for Huarong AMC and its offshore funding platforms; and (3) whether Huarong AMC can maintain diversified funding sources and adequate liquidity.

Given that Huarong AMC's ratings are under review for downgrade, it is unlikely that they will be upgraded in the next 12-18 months.

Huarong AMC's ratings could be confirmed if (1) the relevant transaction does not materially negatively affect its financial position and BCA, and (2) the structure of the relevant transaction does not bring into question the assumption of a very high level of support from the Government of China (A1 stable) for Huarong AMC and its offshore funding platforms.

Huarong AMC's ratings could be downgraded if (1) the relevant transaction significantly weakens its financial position and BCA, or (2) Moody's assesses that there is a material weakening in the level of government support for Huarong AMC and its offshore funding platforms.

Huarong AMC's BCA could be downgraded if (1) its asset quality, profitability or capital base weakens materially because of significant impairment losses or potential changes in its businesses and organizational structure; (2) its funding and liquidity deteriorate due to the disruption caused by the delayed publication of its 2020 annual results; or (3) there is a major correction in China's property market, reducing recovery prospects for the company's property-related exposures.

The ratings of Huarong AMC's offshore financing vehicles could be downgraded if (1) Huarong AMC's long-term issuer rating is downgraded, or (2) Moody's assesses that Huarong AMC's ability and willingness to support its overseas subsidiaries has weakened.

The methodologies used in these ratings were Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Headquartered in Beijing, China Huarong Asset Management Co., Ltd. reported consolidated assets of RMB1,732 billion as of 30 June 2020.

LIST OF AFFECTED RATINGS

China Huarong Asset Management Co., Ltd.:

Placed under review for downgrade

• Long-term (local and foreign currency) issuer rating, currently A3

• Short-term (local and foreign currency) issuer rating, currently P-2

• Entity-level outlook changed to rating under review from stable

Huarong Finance 2017 Co., Ltd:

Placed under review for downgrade

• Long-term (local currency) backed senior unsecured MTN, currently (P)Baa1

• Long-term (local currency) backed senior unsecured debt rating, currently Baa1(hyb)

• Long-term (local and foreign currency) backed senior unsecured debt rating, currently Baa1

• Entity-level outlook changed to rating under review from stable

Huarong Finance II Co., Ltd:

Placed under review for downgrade

• Long-term (local currency) backed senior unsecured MTN, currently (P)Baa1

• Long-term (local currency) backed senior unsecured debt rating, currently Baa1

• Long-term (local currency) backed senior unsecured debt rating, currently Baa1(hyb)

• Entity-level outlook changed to rating under review from stable

Huarong Finance 2019 Co., Ltd.:

Placed under review for downgrade

• Long-term (local and foreign currency) backed senior unsecured MTN, currently (P)Baa1

• Short-term (local and foreign currency) backed senior unsecured MTN, currently (P)P-2

• Long-term (local currency) backed senior unsecured debt rating, currently Baa1

• Entity-level outlook changed to rating under review from stable

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entities are participating and the rated entities or their agent(s) generally provide Moody's with information for the purposes of its ratings process. Please refer to www.moodys.com for the Regulatory Disclosures for each credit rating action under the ratings tab on the issuer/entity page and for details of Moody's Policy for Designating Non-Participating Rated Entities.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

REFERENCES/CITATIONS

[1] https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0401/2021033101720.pdf

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

David Yin
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Sophia Lee, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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