China Fishery Group vessel. (Photo Credit: CFG)

China Fishery Group's credit rating downgraded due to unpaid loan

HONG KONG
Tuesday, December 01, 2015, 02:00 (GMT + 9)

China Fishery Group has been downgraded by two levels by Moody's Investors Service, which means the firm is likely to be near default, after a Hong Kong court had appointed three executives from KPMG as provisional liquidators.

The Court’s decision was taken in response to an application filed by one of the firm's lenders, the bank HSBC.

"The downgrade reflects the consideration that the recovery prospects for senior unsecured bondholders could fall further after actions taken by a lender for the group," pointed out Lina Choi, a Moody's Vice President and Senior Credit Officer.

Moody's informed that the appointment of the provisional liquidators was intended to preserve the assets of the company, indicating that the process of debt restructuring had become more challenging.

In addition, the appointment of the provisional liquidators triggered the acceleration of the repayment of its senior unsecured bonds due July 2019.

With the increased complexity and lengthening of the debt-restructuring process, the company will be deprived of normal credit. Its cash flow will also weaken substantially and its assets will erode. As a result, the recovery rate for bond holders will likely fall further.

Moody's negative ratings outlook reflects the risk of a further decline in recovery prospects for bondholders.

China Fishery, with operations in Peru, has seen a decline in profits since the beginning of this year. Its cash position dwindled to USD 41.3 million as at 28 June from USD 170.5 million half a year earlier, Bloomberg reported.

In August, China Fishery and its parent Pacific Andes International Holdings Ltd. said they had received notices from the Monetary Authority of Singapore and the Commercial Affairs Department stating they were being investigated for an offense under the Securities and Futures Act.

“We believe creditor banks might have found it difficult to roll over the maturing debt given a lack of transparency of the investigations and the potential impact of El Nino,” JPMorgan Chase & Co. analyst Daniel Fan said in a Thursday research note.

“The key focus is more about whether China Fishery’s rights-to-catch in Peru is being affected on the latest round of negative developments, which is more important than asset coverage,” the analyst added.

Related article:

- Court appoints liquidators for China Fishery

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