Shuli Ren, 29 April 2021
After the collapse of Lehman Brothers Holdings Inc., the Big Three rating companies were blamed for their enabling roles in the subprime mortgage crisis. Troubled securitized products would not have been marketed and sold without their seal of investment-grade approval. In fact, investors relied on their ratings, often blindly.
Over a decade later, similar drama is unfolding with state-owned China Huarong Asset Management Co. After failing to release its 2020 financials on time amid media reports of a deep restructuring, the distressed-asset manager became a distressed asset itself. Its 4.5% perpetual bond is trading at 70 cents on the dollar, not at all aligned with its safe-as-cash ratings. With $22 billion in dollar bonds outstanding, Huarong has issues due every month into the summer. Continue reading “Article: How the Big Three Rating Companies Got China Huarong So Wrong”