Worries over China Huarong Asset Management's ability to repay its debts surfaced in April after it missed a deadline for filing its 2020 earnings, sparking a rout in its dollar-denominated bonds that spread to other issuers.
Huarong International said in a Hong Kong Stock Exchange filing that it had decided to redeem the $500 million, 2.875% unsubordinated perpetual bond issued by Huarong Finance II Co on Sept. 14.
The announcement came exactly 60 days before the bond's Sept. 14 call date, the earliest possible notification. A failure to call the bond would have triggered a sharp increase in its coupon.
It sent a market signal that "they really may have abundant liquidity," said a portfolio manager in Hong Kong.
The mid price on the perpetual bond was 82.75 cents as recently as Monday, according to Refinitiv data, having touched a low of 56.25 cents in May.
Some investors worried that a China Huarong default could leave foreigners losing out, while raising broader questions about implicit government backing of state-owned enterprises.
But China Huarong has not missed any bond payments, most recently repaying a maturing $400 million dollar bond last week.
It has said it cannot determine when it will publish its 2020 earnings, but will hold its first extraordinary shareholder meeting for 2021 on Aug. 17.
Amid a regulatory push to sell non-core assets as part of its business revamp, the company announced plans last month to sell stakes in a distressed asset exchange unit.
In a statement on its official WeChat account on Friday, Huarong International said that in the second half it would focus on "the three central tasks of clearing and resolving risks, steady business development and liquidity management."
"This is obviously a nice signal," said Hayden Briscoe, head of Asia Pacific fixed income at UBS Asset Management, noting the company's attempts at shrinking its balance sheet could eventually help to lower the sector risk of China's state-owned asset management companies.
(Reporting by Andrew Galbraith; editing by John Stonestreet)
By Andrew Galbraith