Fitch Ratings yesterday lowered its individual rating to "E" from "D/E" for Great Chinese Bills Finance Corp (力華票券) and placed the Rebar Group subsidiary on its Rating Watch Evolving (RWE) list, the UK ratings agency said.
Fitch said that "RWE signified that ratings on Great Chinese Bills Finance may be affirmed, raised or lowered," depending on how this Taipei-based firm turns around its liquidity problems in the short term.
Ratings placed under RWE include issuer default rating "B+"; national long-term rating "BB+(twn)"; short-term foreign currency rating "B"; and national short-term rating "B(twn)."
Great Chinese Bills Finance was 60-percent owned by the Rebar Asia Pacific Group (力霸亞太企業集團) via The Chinese Bank (中華銀行).
The ratings were lowered after an acute liquidity crisis over the weekend -- in the form of a bank run -- occurred at The Chinese Bank following the emergence of the Rebar Group's latest woes.
Last Thursday, two other Rebar affiliates -- China Rebar Co (中國力霸) and Chia Hsin Food and Synthetic Fiber Co (嘉新食品化纖) -- were given approval for corporate restructuring and insolvency protection by the Taipei District Court.
Fitch said it had long considered the bills finance firm's credit profile as highly risky given its high credit exposure to affiliates and significant problems with assets.
In the first half of last year, Great Chinese Bills Finance's total guarantee exposure to affiliates totaled NT$1.5 billion (US$45.9 million) and accounted for 44 percent of its total net worth, well in excess of the regulatory limit of 35 percent, according to Fitch.
"It is possible that these exposures to affiliates are underreported," Fitch said.
Great Chinese Bills Finance reported a capital adequacy ratio of 29 percent for the first half of last year, but it "would have barely any capital left if the credit exposures to its related parties, non-performing loans and unamortized NPL losses are fully discounted," Fitch added.
The financial regulator may ask state-controlled banks to acquire Great Chinese Bills Finance after settling the company's liquidity crisis, which implies that the eventual outcome will be credit-positive, according to the ratings agency.
On Sunday, the Financial Supervisory Commission ordered state-controlled Taiwan Cooperative Bank (合作金庫銀行) and private-run Cathay United Bank (國泰世華銀行) to jointly manage Great Chinese Bills Finance.
EASTERN MEDIA
Separately, Fitch said the ratings and outlook for Eastern Media International Corp (東森國際) and the Eastern Broadcasting Co (東森電視台) were not affected by corporate reorganization of China Rebar and Chia Hsin.
Eastern Media was spun off from the Rebar Group in 2004 and is speculated to be involved in a possible Rebar insider trading case.
"Eastern Media inevitably suffers some impact on management reputation due to the family relationship between its chairman Gary Wang (
Fitch said that it expected there would be a limited impact on Eastern Media and Eastern Broadcasting because both had kept their dealings with Rebar Group at arm's length and had not made any debt guarantees or inter-company loans to Rebar Group or its affiliates.
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