Fitch turns China Huarong watch to positive

Fitch Ratings said it revised the rating watch on China Huarong Asset Management Co., Ltd.'s BBB long-term issuer default ratings and the notes issued under its subsidiaries Huarong Finance II Co. Ltd., Huarong Finance 2017 Co., Ltd. and Huarong Finance 2019 Co., Ltd. to positive from rating watch negative.

“The revision follows the company's announcement of a recapitalization plan on Aug. 18, 2021. We regard the plan as a step towards the company alleviating its financial stress amid its expected net loss, and believe it reduces the uncertainty that we captured in the rating watch negative previously. Fitch believes there are certain tail-end uncertainties relating to the execution of the plan, as well as potential dilution of government support,” the agency said in a press release.

The proposed plan requires China Citic Group Corp., China Insurance Investment Co., Ltd., China Life Asset Management Co. Ltd., China Cinda Asset Management Co., Ltd. and Sino-Ocean Capital Holding Ltd. to buy newly issued China Huarong's shares.

“We regard the coordinated effort of state-owned enterprises (SOE), most of which are under the ministry of finance's (MoF) direct control, as a form of extraordinary support,” Fitch said.

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