S&P downgrades China Fishery to 'D' after it defaults on coupon payment

STANDARD & Poor's Ratings Services (S&P) on Monday said it has lowered its long-term corporate credit rating on Singapore-listed China Fishery to "D" (default) from "SD" (selective default).

At the same time, the credit rating agency lowered its long-term issue rating on the senior unsecured notes due 2019 to "D" from "CC" (currently highly vulnerable). China Fishery guarantees the notes.

S&P also lowered its long-term Greater China regional scale ratings on China Fishery to "D" from "SD".

It also downgraded the outstanding notes to "D" from "cnCC". (This latter rating means it is currently highly vulnerable to non-payment; it is used when a default has not yet occurred, but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.)

China Fishery is a fishing company with operations in Peruvian, African, and Russian waters. S&P made the downgrades after China Fishery missed a coupon payment on the US$300 million senior unsecured notes due 2019 that China Fishery guarantees.

The coupon payment of about US$14.63 million was due on Jan 30, 2016.

"We do not expect China Fishery to make the payment within the 30-day grace period, given that the company may need to reserve all available cash to fund its fishing operations in Peru," said credit analyst Lillian Chiou. "We also do not believe the company will pay its other debt obligations, given its tight liquidity position."

All of China Fishery's banking facilities are at a standstill, and it has no additional liquidity support, S&P noted. It added that China Fishery's operating performance is expected to continue to deteriorate over the next 12 months, with revenue for its fiscal 2015 (ended September) dropping 30-35 per cent year on year.

This is due to the adverse weather conditions that have affected fishing catches in Peru, significantly reduced sales from the fish supply business in Russia, and still-weak operations in Namibia.

S&P also expects revenue growth in fiscal 2016 to remain flat, given the impact of El Nino on the 2015 "Season B", and possible delays in fishing activities, given the company's liquidity distress.