Moody's downgrades Zhongyuan AMC

Moody's Investors Service said it downgraded the local-currency and foreign-currency issuer ratings of Zhongyuan Asset Management Co., Ltd. to Ba1 from Baa3. Also, Moody's assigned a Ba1 corporate family rating to the company and downgraded its baseline credit assessment to b2 from b1.

Concurrently, Moody's changed the outlook on Zhongyuan AMC to stable from negative.

“This rating action comes after China's Communist Party's Commission for Discipline Inspection in Henan province announced on July 29 that Zhongyuan AMC's former chief executive, Yue Shengli, was under investigation for a suspected violation of laws,” Moody’s said in a press release.

Though the details have not yet been made public, the alleged misconduct suggests a material weakness in corporate governance, the agency said.

Another cause for concern, the company changed the auditor of its 2019 report to Hexin Certified Public Accountants LLP, a local CPA firm, from Ernst & Young, which Moody's said raises concerns over the quality of financial reporting and internal controls.

The stable outlook reflects the view a high level of government support will help the company maintain its financial profile at the current level and limit any negative impact, Moody’s said.

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