Huarong Asset Management reveals $15.4 billion loss

The crippling losses confirmed fears that the company faced a huge hole in its finances

Huarong Asset Management has disclosed investment deals with Chinese companies, including the state-backed Citic, as the bad debt manager under pressure announced that it lost more than 100 billion Rmb ($15.4 billion) last year.

The company said late Wednesday that Citic, its fellow bad debt manager Cinda Asset Management, China Insurance Investment, China Life Asset Management and Sino-Ocean Capital Holding intended to make strategic investments.

The announcement is a breakthrough for China’s largest distressed debt investor, which was thrown into confusion after failing to release its annual financial results in April.

The crippling losses confirmed fears that the company faced a huge hole in its finances. The long wait for information sparked a debate about the extent to which the Chinese government would support its companies and bondholders abroad, adding to a feeling of unease in Asian credit markets where Huarong borrowed more than $20 billion.

Lai Xiaomin, the former president of the company who oversaw a period of aggressive expansion both in China and internationally, was executed for financial crimes in January.

Huarong, which is the majority owner of the Chinese government but reports the international private investment group Warburg Pincus among its investors, said its losses amounted to 102.9 billion Rmb in 2020 based on unaudited financial data. In 2019, the net profit was 1.4 billion Rmb.

Huarong attributed his losses to his former president, as well as the impact of the coronavirus pandemic, which he said contributed to a more rapid “deterioration” in the quality of some assets.

The international bond market, whose foreign investment was boosted by Huarong Asset Management borrowing, closely watched the company this week when it held a shareholders’ meeting on Tuesday.