Mainland authorities fined a credit rating agency for the first time ever, setting a precedent amid a growing number of defaults.
The troubled Dagong Global Credit Rating was mandated by a Hangzhou-based court to pay up to 10 percent of 494 million yuan in debt claims to 400 individual bondholders, according to a «Bloomberg» report citing an official ruling.
The repayments relate to the 1.4 billion yuan default at Wuyang Construction three years ago.
In addition to the construction firm, controller Chen Zhizhang, underwriter Tebon Securities alongside an accounting and legal company were also responsible.
Upgrade Leader
Prior to the fine, authorities had already publicly named Dagong as a suspicious case due the frequency of issuer rating upgrades being «clearly above the industry average» during a period when the corporate bond market faced increased stress.
17 upgrades out of the total 54 in the whole industry during the period observed belonged to Dagong. More interestingly, it was also a leader specifically for making upgrades to issuers that recently switched rating agencies.
In addition to a 2017 default on two onshore bonds, the Wuyang scandal allegedly also included accusations by the securities watchdog of falsified financial documents for bond sales.
