China Fishery Missed Loan Payment This Month, S&P Says

  • Lenders may have found it difficult to roll over loans: JPM
  • KPMG executives named as provisional liquidators, Moody's says

China Fishery Group Ltd. failed to repay a $31 million installment due earlier this month on a $650 million loan, according to Standard & Poor’s.

“As a result, one of the lenders successfully applied for provisional liquidators, indicating that the lender is unwilling to negotiate for further extensions or waivers,” S&P said in a statement Thursday. Moody’s Investors Service cut its rating by two levels to Ca on Friday as a Hong Kong court appointed three executives from KPMG as provisional liquidators. The grade indicates the company is Likely in, or very near default.

HSBC Holdings Plc, one of the lenders to the loan, has filed an application to the High Court of Hong Kong to appoint provisional liquidators to the Singapore-listed fishing group. HSBC spokesman Adam Harper said in an e-mail that he can’t comment and Katie Tsui, an investor relations officer at China Fishery, also declined.

China Fishery, with operations in Peru, has seen a decline in profits since the beginning of this year. Its cash position dwindled to $41.3 million as at June 28 from $170.5 million half a year earlier. Its 9.75 percent notes due 2019 fell 0.18 cent to a record 31.85 cents on the dollar as of 4:53 p.m in Hong Kong, Bloomberg-compiled prices show.

Singapore Investigation

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 process of debt restructuring at China Fishery has become more challenging after KPMG employees Edward Middleton, Fergal Power and Kris Beighton were appointed provisional liquidators, Moody’s said in a statement, citing information posted on the accounting firm’s website.

“With the increased complexity and lengthening of the debt restructuring process, the company will be deprived of normal credit,” Moody’s said. “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.”

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