Investment

Moody’s seek control of China’s biggest rating firm

Bloomberg/Scott Eells

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Moody’s reached a framework agreement to increase its holding in Chengxin to more than 50 per cent, from 30 per cent.

Monday 11, March 2019

(Bloomberg) --Moody’s is pursuing a deal that would give it control of China’s Chengxin International Credit Rating Company, the nation’s largest ratings company.

The rating agencies have approached the People’s Bank of China for feedback on the plan.

Global rating firms are rushing to enter what will soon be the world’s second-largest bond market after the PBOC eased requirements last year. S&P Global Ratings in January became the first foreign ratings company to get regulators’ approval for its local unit to grade Chinese domestic bonds.

Precise terms of a deal between Moody’s and Chengxin still need to be negotiated, and there is no certainty they will proceed with a transaction.

The move, if completed, would be the latest instance of an international financial company taking majority control of a local Chinese venture, a key part of China’s financial opening.

Similarly, UBS Group recently took a majority stake in its onshore securities venture, while Mastercard agreed to set up a bank card clearing company with NetsUnion Clearing Corporation last week, the New York-based firm will hold 51 per cent of the business.

Yi Gang, PBOC Governor, said that China had met most of the financial opening aims it had announced last year, citing S&P Global’s move as an example of the successful efforts.

Beijing-based Chengxin, established in 1992, was the first jointly-owned credit rating company approved by the central bank. It has since become China’s largest in terms of market share on bonds graded and is ranked number four in the world.

The Chengxin stake held by Moody’s was diluted in 2017 to 30 per cent, from 49 per cent, following a restructuring. At the time, Moody’s said its investment in the company hadn’t reduced and denied that the move was preparation for an independent onshore rating business.

Moody’s has registered two wholly-owned entities in Beijing and Shanghai.

 

TAGS : Moody’s, Chengxin, PBOC, Mastercard, UBS Group

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