This Perpetual Bond Is A Good Deal

Huarong Finance 4.50% Perpetual
Price: 100.50
Yield to call: 4.38%
Call date: 24Jan2022
Coupon reset: US treasury 5 years (currently at 1.95) + 7.773%
Moody's: Baa1
Fitch: A-
Ccy: USD

Coupon reset is US treasury 5 years + 7.773%. This means even if US treasury 5 years is at zero on 24Jan2022 at the call date, this bond is likely to be called.
=> Hence this bond will not be sensitive to interest rate hike.

Huarong Finance is wholly owned by China Huarong International Holdings Limited (Huarong International), which is in turn wholly owned by Huarong AMC.


Commentary from rating agency Moody's:

- The (P)Baa1 long-term senior unsecured MTN program rating reflects Huarong AMC's ability and very high willingness to support Huarong Finance 2017's obligations.

- Moody's believes that a failure by Huarong AMC to support Huarong Finance 2017's securities would result in significant reputational risk and would negatively affect the former's ability to access the onshore and offshore bond and bank loan markets.

- In addition, such a failure could damage the reputation of China's Ministry of Finance (MoF), the largest shareholder of Huarong AMC, and have wider repercussions in the offshore and onshore debt markets if a majority-owned entity by the MoF were allowed to default.

Link: https://m.moodys.com/research/Moodys-assigns-PBaa1-rating-to-Huarong-Finance-2017s-proposed-MTN--PR_360277