Moody's lowers Chaoda rating

PUBLISHED : Saturday, 08 October, 2011, 12:00am
UPDATED : Saturday, 08 October, 2011, 12:00am


Moody's Investors Service yesterday downgraded the rating of Hong Kong-listed mainland farming firm Chaoda Modern Agriculture (Holdings) to Ba3 from Ba2.

The downgrade follows delays in the release of the firm's annual results announcement, which was due last Friday.

'The delays breach the Hong Kong stock exchange's listing rules, and introduce further uncertainty in respect of Chaoda's financial reporting and financial position,' said Ken Chan, a senior analyst at Moody's.

Anonymous Analytics, an investigative blog whose contributors are equity traders, alleged in a 38-page report that Chaoda had falsified its financial statements and had embezzled more than US$400 million from shareholders.

Chaoda has declined to comment on the report and suspended trading in its shares just before its publication. Moody's also placed Chaoda's ratings on review for further possible downgrades as a result of recent developments, the ongoing share trading suspension, and Anonymous Analytics' allegations.

The rating agency said the bad news surrounding the firm would limit its access to capital markets and damage its expansion strategy if it did not resolve its problems soon.

'[Chaoda] historically does not typically borrow funds onshore and is therefore dependent on offshore equity and lending to fund its expansion plans,' Chan said.

Moody's said the holders of Chaoda's outstanding US$200 million convertible bonds could accelerate debt repayment if trading in the stock was suspended for more than 60 consecutive days, or if the company failed to file its full-year results within 180 days from the end of its financial year.

Chaoda reported cash holding of 3.9 billion yuan (HK$4.77 billion) as of December last year in its interim results.