S&P Raises China Forestry Debt Rating on Reduced Default Risks
China Forestry Holdings Co., the timber supply company partly owned by the Carlyle Group, had its credit rating raised by Standard & Poor’s Ratings after it bought back some of its debt.
S&P increased China Forestry’s rating one level to CCC-, according to a statement today. It has a “negative outlook” on the company’s ratings.
The timber company proposed to buy back as much as $120 million outstanding on its 7.75 percent notes due November 2015, according to a statement to Hong Kong’s stock exchange on July 15. Potentially faster repayments of its notes will reduce the risk of default in the next six months, Standard & Poor’s said.
Still, the timber company’s cash balance will reduce significantly following the partial redemption, and its “financial strength and business sustainability to remain vulnerable in the next year,” S&P said, citing the uncertain quality of the company’s forest assets and future logging permits.
China Forestry will report a first-half net loss because of “irregularities” in its financial statements and interest expenses, according to a July 13 stock exchange filing. The company reported first-half net income of 429 million yuan ($66 million) in the previous corresponding period.
China Forestry shares in Hong Kong have been suspended since Jan. 26, according to data compiled by Bloomberg.
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To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net
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