Moody's downgrades China Fishery


SeafoodSource staff

Published on
March 27, 2014
Moody's Investors Service downgraded China Fishery Group Limited's corporate family rating and the senior unsecured rating on notes issued by its subsidiary -- CFG Investment S.A.C. from B1 to B2, according to a statement.

The downgrade marks the end of a review process that began on 12 February.

"The downgrade has been prompted by China Fishery's announcement that it will end its long-term contract supply business in Russia, which will significantly impact the company's capacity for debt servicing," said Lina Choi, a Moody's VP and senior analyst. China Fishery has decided not to continue the arrangements of pre-paying for purchases from Russian vessels and financing part of the working capital of the suppliers.

Moody's also studied China Fishery's performance in 2013, and estimated that the company will lose annual earnings before interest, taxes, dividends and acquisitions (EBITDA) of about USD 176 million (EUR 127.9million), which accounted for 72 percent of total EBITDA in 2013.

China Fishery has indicated it plans to make up the loss through contributions from Peruvian fishmeal and fish oil company Copeinca, which it acquired in 2013, but that appears to have hurt and not helped the company's ratings. Moody's estimated that the Russian supply business was more profitable for China Fishery than fishmeal.

"The downgrade is further based on the consideration that China Fishery's earnings will become mainly reliant on the fish meal business and will experience a decline in diversity," Choi said.

Moody's also cited "revolving credit facilities with a bank consortium" as a factor in the downgrade, Choi said.

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