Blog: Huarong Leasing Management Hong Kong Co Ltd — Moody’s downgrades Huarong Financial Leasing to Baa2; ratings remain on review for downgrade – Yahoo Finance

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Rating Action: Moody’s downgrades Huarong Financial Leasing to Baa2; ratings remain on review for downgradeGlobal Credit Research – 30 Apr 2021Hong Kong, April 30, 2021 — Moody’s Investors Service has downgraded the local currency and foreign currency long-term issuer ratings of China Huarong Financial Leasing Co., Ltd. to Baa2 from Baa1. The ratings remain on review for downgrade.In addition, Moody’s has taken the following actions on the backed senior unsecured medium-term note (MTN) program ratings and the backed short-term senior unsecured debt rating of Huarong Leasing Management Hong Kong Company Limited, the primary overseas platform of Huarong Financial Leasing:(1) Downgraded to (P)Baa2 from (P)Baa1 the long-term senior unsecured MTN program rating for the instruments to be issued under the program and guaranteed by Huarong Financial Leasing.(2) Downgraded to (P)Baa3/(P)P-3 from (P)Baa2/(P)P-2 the long-term and short-term senior unsecured MTN program ratings for the instruments to be issued under the program and supported by a keepwell deed from Huarong Financial Leasing.(3) Downgraded to P-3 from P-2 the short-term senior unsecured debt rating for the notes supported by a keepwell deed from Huarong Financial Leasing.These ratings also remain on review for downgrade.Today’s rating actions follow Moody’s downgrade of China Huarong Asset Management Co., Ltd.’s (Huarong AMC, Baa1 RUR) long-term issuer rating to Baa1, and its decision to maintain the ratings on review for downgrade on 29 April 2021. For more information on this rating action, please refer to https://ift.tt/32ZozUR list of the affected ratings can be found at the end of this press release.RATINGS RATIONALEHuarong Financial Leasing has maintained good financial metrics over the past few years and operates relatively independently from its parent. It published its audited 2020 annual results on 19 April 2021, reporting an annualized return on average assets of 1.13% in 2020. As of the end of 2020, its capital adequacy ratio was 13.0%, higher than the minimum regulatory requirement of 10.5%. In addition, Huarong Financial Leasing’s funding profile has not been materially affected by the market volatility so far. Therefore, its standalone assessment remains unchanged at ba3.Although Moody’s assessment of a very high level of support from the Government of China (A1 stable) to Huarong Financial Leasing remains under review, it expects such support in times of need to be indirect and to flow through its parent, Huarong AMC. Given the heightened uncertainties facing Huarong AMC and its weakened funding profile, Moody’s has assessed that the government support flowing through its parent to Huarong Financial Leasing becomes more uncertain as reflected in the narrowed notches of support uplift, which serves as the basis for today’s downgrade action. As of December 2020, Huarong AMC had a 79.92% stake in Huarong Financial Leasing.The one-notch gap between Huarong Financial Leasing’s long-term issuer rating and its parent’s reflects the leasing business’ limited synergies and operational integration with Huarong AMC’s core distressed-asset management business.The ratings of Huarong Financial Leasing remain on review for downgrade, reflecting Moody’s expectation that a significant change in Huarong AMC’s credit profile will have a material impact on Huarong Financial Leasing’s ratings.The review will focus on (1) the impact, if any, of Huarong AMC’s relevant transaction on its own financial position; and (2) the implications on the credit profile of, and the level of support to be assumed for, Huarong Financial Leasing; and (3) whether Huarong Financial Leasing can maintain diversified funding sources and adequate liquidity.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSGiven that Huarong Financial Leasing’s ratings are under review for downgrade, it is unlikely that they will be upgraded over the next 12-18 months.Huarong Financial Leasing’s ratings could be confirmed if (1) Huarong AMC’s ratings are confirmed, and (2) Moody’s assesses that the company will continue to benefit from a very high level of indirect support from the Government of China through its parent.Huarong Financial Leasing’s ratings could be downgraded if Huarong AMC’s long-term issuer rating is downgraded.Huarong Financial Leasing’s ratings could also be downgraded should the company’s importance to its parent decline; or the parent’s stake in the leasing company reduces significantly to below 50.1%.Huarong Financial Leasing’s standalone assessment could be lowered if the company’s asset quality deteriorates and credit costs rise; funding profile and liquidity weaken; or capital levels weaken.LIST OF AFFECTED RATINGSChina Huarong Financial Leasing Co., Ltd.:Maintained on review for downgrade** Long-term (local and foreign currency) issuer rating downgraded to Baa2 from Baa1** Short-term (local and foreign currency) issuer rating, currently P-2** Entity-level outlook is rating under reviewHuarong Leasing Management Hong Kong Company Limited:Maintained on review for downgrade** Backed long-term (local and foreign currency) senior unsecured MTN downgraded to (P)Baa2 from (P)Baa1** Backed long-term (local and foreign currency) senior unsecured MTN downgraded to (P)Baa3 from (P)Baa2** Backed other short-term (local and foreign currency) MTN, currently (P)P-2** Backed other short-term (local and foreign currency) MTN, downgraded to (P)P-3 from (P)P-2** Backed other short-term (foreign currency) regular bond/debenture downgraded to P-3 from P-2** Entity-level outlook is rating under reviewThe principal methodology used in these ratings was Finance Companies Methodology published in November 2019 and available at https://ift.tt/39CxYFV. Alternatively, please see the Rating Methodologies page on http://www.moodys.com for a copy of this methodology.Headquartered in Hangzhou, Zhejiang province, Huarong Financial Leasing reported assets of RMB138.3 billion as of the end of 2020.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://ift.tt/3r4KzHE ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on http://www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website http://www.moodys.com.Moody’s considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody’s. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entities are participating and the rated entities or their agent(s) generally provide Moody’s with information for the purposes of its ratings process. Please refer to http://www.moodys.com for the Regulatory Disclosures for each credit rating action under the ratings tab on the issuer/entity page and for details of Moody’s Policy for Designating Non-Participating Rated Entities.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ift.tt/3aPfqCt Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on http://www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. 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