Industrial & Commercial Bank of China loan helps China Huarong US$452m offshore bond

China Huarong Asset Management Company repaid an offshore bond maturing Tuesday with funds provided by the nation’s largest state-owned bank, people familiar with the matter said, a sign that Chinese lenders are heeding government calls to support the embattled distressed-debt manager, Bloomberg reports.

Industrial & Commercial Bank of China’s Singapore branch gave Huarong a loan to help the company repay its S$600 million (US$452 million) bond due April 27, the people said, asking not to be identified discussing private information.

The support comes after China’s financial regulator asked banks to extend loans to Huarong by at least six months to help the company refinance debt, the people said.

While news outlets including REDD have previously reported aspects of the China Banking and Insurance Regulatory Commission’s guidance, investors have been looking for clues as to whether it would apply to offshore debt.

Huarong’s offshore bonds tumbled this month after the company missed a deadline to report earnings, fueling speculation of a looming debt restructuring that has roiled credit markets across Asia.

With more than US$20 billion of offshore notes outstanding — including US$3.7 billion due this year — Huarong is one of China’s most prolific borrowers in international markets. It’s also majority-owned by the country’s finance ministry, making it a closely watched proxy of the government’s willingness to backstop the liabilities of state-owned companies.

The lack of clarity around Beijing’s support led Fitch Ratings to cut its credit rating on Huarong by three levels on Monday, a day after the company said it would miss a second deadline to report its annual results at the end of April. Huarong’s dollar bonds due 2022 were indicated slightly higher on Wednesday, with the 3.75 percent note up 0.2 US cent to 81.1 US cents on the dollar.

The 4.5 percent perpetual bond was at 65.2 US cents, down about 0.2 cent, according to Bloomberg-compiled prices.

ICBC declined to comment. The CBIRC and Huarong didn’t immediately respond to requests for comment.

Huarong units said earlier Tuesday that they repaid the Singapore dollar bond along with 960 million yuan (US$148 million) of debt also maturing April 27.

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