Moody’s cuts Huarong AMC

Moody's Investors Service said it downgraded China Huarong Asset Management Co., Ltd.'s (Huarong AMC) local-currency and foreign-currency long-term issuer ratings to Ba1 from Baa3. The agency also assigned the company a Ba1 corporate family rating.

Concurrently, Moody’s lowered to Ba2 from Ba1 the long-term backed senior unsecured debt ratings of Huarong AMC's offshore financing vehicles – including Huarong Finance 2017 Co., Ltd., Huarong Finance II Co., Ltd. and Huarong Finance 2019 Co., Ltd., and their long-term backed senior unsecured medium-term note (MTN) program ratings to (P)Ba2 from (P)Ba1. China Huarong International Holdings Ltd. guarantees the notes.

These actions conclude the review for downgrade started on Sept. 25, the agency said. It assigned a negative outlook.

“The downgrade of Huarong AMC's ratings reflects Moody's assessment of lower support from the government of China (A1 negative) for the company because the agency considers the government is prioritizing its resources to support state-owned enterprises with public policy mandates over companies with material exposure to commercial businesses. In addition, government support for some state-owned asset management companies (AMCs) that have suffered sizable losses and capital erosion lacks transparency and consistency. Moody's has consequently narrowed the government support uplift by one notch

“The negative outlook reflects the pressure on Huarong AMC's profitability, asset quality and capital position from the persistent strain on China's property market and slowing economic growth,” the agency said in a press release.

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