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[HONG KONG] Fitch Ratings says that the risk of China Fishery Group Limited (China Fishery, Issuer Default Rating: C) being liquidated has been reduced after the High Court of Hong Kong's order to remove its provisional liquidators.
The court decision came after China Fishery's parent, Pacific Andes International Holdings Limited (Pacific Andes), reached an agreement with a majority of China Fishery's club loan lenders in December 2015. In return for the lenders' support to dismiss the winding-up petition filed by HSBC, Pacific Andes has agreed to a number of measures to restructure China Fishery. These measures include an independent accounting review, appointment of a chief restructuring officer and new CFO, as well as disposal of key assets.
There are several key events to watch in the coming few weeks: the court hearings on January 8 and January 26 2016 on the winding-up petition by HSBC in which the petition could be dismissed, as well as the coupon payment on January 30 for China Fishery's US$300 million 9.75 per cent senior notes.
If the outcomes of these events are favourable to Pacific Andes, Fitch will review the ratings for China Fishery and consider positive rating action. If the company fails to pay the coupon after a 30-day grace period, the ratings will be downgraded to 'RD', indicating a restricted default.
In addition, Pacific Andes has also announced that it has received non-binding memorandums of understanding from two potential buyers for China Fishery's Peruvian business at an indicative enterprise value of US$1.7 billion. The Peruvian business is China Fishery's key asset, and accounts for the vast majority of China Fishery's revenue and EBITDA. In the event of a sale, Fitch believes that there will be substantial improvement in China Fishery's financial profile, but the remaining company would have a vastly changed business profile. Fitch believes that the Peruvian business is the most stable of China Fishery's different segments.
The provisional liquidators did not participate in Fitch's analytical process.