(Bloomberg) -- Growing panic over the financial health of one of China’s largest bad-debt managers spilled into the broader market, as traders circulated a Caixin report that openly considered the worst-case scenario for the company.China Huarong Asset Management Co.’s $300 million 3.375% bond due May 2022 tumbled 8.4 cents on the dollar to 80.8 cents, while a 5% bond maturing in 2025 fell 10 cents to 79.3 cents, Bloomberg-compiled prices show. In a commentary dated Monday, Ling Huawei, managing editor of Caixin Media and Caixin Weekly, discussed the possibility of a China Huarong bankruptcy.The selloff spread to other high-yield Chinese dollar notes, with some property bonds falling by a record. Asia’s investment-grade dollar debt spreads widened as much as 3 basis points, while a gauge of Asia credit risk widened for a seventh straight day, set for the longest rising streak since 2018.“Huarong is a $22 billion curve and as a distressed situation it dwarfs anything that we have seen in the Asia credit market before,” said Owen Gallimore, head of trading strategy at Australia & New Zealand Banking Group. “This is a fatal event for a few trading desks and small funds.”Bonds linked to the company have plunged this month after China Huarong failed to publish its 2020 preliminary results by the March 31 deadline, with Caixin attributing the delay to plans for a significant financial restructuring. The stock has been suspended in Hong Kong since April 1. The company has until the end of the month to release its final earnings report. China Huarong’s biggest shareholder is the country’s Ministry of Finance.China Huarong has been under a shadow since its then chairman Lai Xiaomin came under investigation in 2018. Under his watch, the company expanded into areas including securities trading, trusts and other investments, deviating from the original mandate of disposing bad debt. Lai was put to death earlier this year for bribery after a brief trial, an unusually harsh sentence for such a crime.China Huarong and its subsidiaries have some $42 billion worth of offshore and local bonds outstanding and 41% of that will come due by the end of next year, according to Bloomberg-compiled data. Dollar bonds make up about $22 billion of its outstanding notes.The company is one of the four state-owned entities set up by China’s government in 1999 to help clean up a banking system riddled with bad debt. It listed in Hong Kong after a $2.5 billion initial public offering in 2015.China Huarong has started trimming non-core assets amid regulatory pressure to return to its roots. Net income slumped 92% in the first half of 2020 from a year earlier as the value of some assets dropped in the wake of the Covid-19 pandemic. The company’s stock market value has tumbled to about $5 billion from $15 billion when it listed.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.