HONG KONG: Moody's Investor Service said on Wednesday that it has withdrawn all of its ratings on Sino-Forest Corp because the ratings agency has insufficient information to maintain them.
The move immediately followed Moody's downgrade of the company's corporate family and senior unsecured debt ratings to Ca from Caa1 because of Sino-Forest's decision not to make a coupon payment on its 2016 convertible bond due on Thursday, Moody's said in a report.
The action comes a day after Sino-Forest, a China-focused forestry company accused of fraud, deferred the release of its third quarter results and decided not to pay the $9.775 million interest payment on the convertible bond.
"This action implies that Sino-Forest will default on this debt obligation if it does not rectify the payment after the 30-day grace period from the due date," said Moody's analyst Liming Zhou in the report.
The Ca rating reflects a high likelihood of default and a low level of expected recovery for bondholders in case bond repayments are accelerated, the report said.
The total principal owing under four series of outstanding senior and convertible notes is about $1.8 billion. The company also has loan facilities in China totaling $70.5 million, Sino-Forest has said.
Zhou said failure to publish its third-quarter results within the specified period would also trigger a breach of covenants under its bond indentures.
Sino-Forest said this week that it would delay reporting its financial results again, putting it in breach of debt covenants and raising the prospect of insolvency proceedings.
Until months ago the largest forestry company listed on the Toronto Stock Exchange, Sino-Forest has been reeling since short-seller Carson Block and his firm Muddy Waters accused it of exaggerating the extent of its Chinese assets. Block alleged that the company had also fabricated certain sales transactions.
Last month, Sino-Forest said a review panel had been able to address and clear the company of many of the allegations, but certain issues remained.
On Monday, Sino-Forest said the panel was still trying to determine the nature and scope of its relationship with intermediaries and suppliers involved in its land dealings.
It is also seeking explanations for issues raised by certain documents, it said, without providing details.
Standard & Poor's and Fitch Ratings have already withdrawn their ratings on the company.
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