Will China Help With Huarong’s $22 Billion Bill? Don’t Hold Your Breath
The asset manager’s ex-boss was executed but Beijing’s ire hasn’t been assuaged. All enablers should expect to be penalized, including those holding dollar bonds.
Lai Xiaomin in 2016: Leaving behind a dark and tangled mess.
Photographer: Bloomberg/BloombergA clumsy drama is unfolding at state-owned China Huarong Asset Management Co., the nation’s largest distressed asset manager. In January, Lai Xiaomin, who oversaw the company from 2012 until he ran into trouble in April 2018, was sentenced to death. He was found guilty of bribery, with bigamy thrown in for good measure. Lai was executed within weeks. On April 1, Huarong said it could not release last year’s financials on time. The company said the auditor needed more time and information. Caixin, an influential local financial news outlet, reported the delay was due to the possibility of a “significant” restructuring.
Huarong’s U.S. dollar-denominated bonds tumbled. The $300 million 3.375% coupon bond, due in May 2022, yielded 9.94% by Friday. With close to $22 billion dollar bonds outstanding, the quasi-sovereign issuer is now priced like China’s junk-rated real estate developers.