SHANGHAI, Aug 24 (Reuters) - Moody's Investor Service on Monday cut credit ratings for Chinese state-backed lender China Huarong Asset Management Co , citing the company's warning that it expects to book a net loss of nearly $16 billion for 2020.
Huarong said last week its 2020 net loss would be 102.9 billion yuan ($15.88 billion), due to what it said was a large change in provision for credit impairment, and said a state consortium led by the Citic Group Corp had agreed to make a strategic investment in the company.
The company had missed a March 31 deadline for filing its 2020 earnings, sparking a rout in its U.S. dollar-denominated bonds that spread to other Chinese issuers.
In a statement late on Monday, Moody's said it had downgraded Huarong's local and foreign currency long-term issuer ratings by one notch to Baa2 from Baa1. The ratings remain on review for further downgrades, it said.
Moody's also downgraded the long-term backed senior unsecured debt ratings for Huarong's offshore financing vehicles by one notch to Baa3 from Baa2. Baa3 is the lowest investment-grade rating on the Moody's long-term issuer rating scale.
"Today's rating actions reflect the deterioration of Huarong AMC's capital and profitability due to large amounts of net losses incurred in 2020 ... Such net losses could result in a failure to comply with the minimum regulatory requirements on capital adequacy and leverage, and indicate that the company cannot sustain its operation without support arranged by the government," Moody's said.
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