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| Nine Dragons denies debt claims |
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http://www.paper.com.cn
2011-06-22 |
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Nine Dragons Paper Holdings Ltd, the largest packaging manufacturer in China, has denied Standard & Poor's claim that it has an aggressive debt-funded appetite for growth.
The company, founded by China's wealthiest woman Zhang Yin, also said on Wednesday that it had not received any written requests for information from the ratings agency to which it had not responded.
The rebuttal followed S&P's announcement on Tuesday that it had pulled its debt ratings for Nine Dragons due to "insufficient access" to the management in order to understand the company's strategy and credit risks.
"The company wishes to clarify that it has not received any written information request by S&P which it has not responded to," Zhang said in a statement filed with the Hong Kong stock exchange on Wednesday.
"The company is willing to cooperate with S&P and ready to respond to any information requests from S&P for the purposes of the rating at any time," she said.
Shares of Nine Dragon rebounded 13.8 percent to HK$6.43 on Wednesday after the company hit back at the allegations, recouping some of the nearly 18 percent in lost ground from the previous day.
Analysts said the reason behind S&P's decision was unconvincing and was probably caused by miscommunication rather than any fundamental change in Nine Dragons' financial situation.
"In our view, this is not a convincing reason to withdraw the ratings as we just had a meeting with management this morning," DBS analyst Patricia Yeung said in a research note.
"It is an issue of communications with investor-relations people, not a matter of financial problems," said Lantis Li, a Hong Kong-based analyst with Capital Securities Corp. "Nine Dragons is having a better business environment than it had during the global financial crisis."
Shareholder activist David Webb also criticized S&P's move in a comment published on his website.
He said the Securities and Futures Commission (SFC) should prohibit credit ratings agencies from releasing announcements on listed companies during trading hours, "for the same reasons that listed companies cannot announce price-sensitive information during market hours unless their stock is suspended. It can lead to unfair and disorderly markets".
A spokesman with the SFC told media on Wednesday that the regulator is looking into the matter.
Nine Dragons also said on Wednesday that Fitch Ratings had not indicated any communication issues with the company's management, nor had it withdrawn its ratings.
The company said it had received a proposal from Moody's Investor Services to assess its debt after S&P's withdrawal, and expected to finalize the appointment shortly.
Analysts said the plunge in Nine Dragon's share price was partly fuelled by investor concern over corporate governance issues surrounding a number of US-listed Chinese companies.
"The market has overreacted to S&P's rating withdrawal as Nine Dragons' operations remain normal," said DBS' Yeung.
Morgan Stanley analysts also said in a research note that they are 80 percent sure that Nine Dragons shares will rise over the next 60 days after clarifications from the management which will help ease investors' concerns over the company's financials.
The S&P move affected just $48 million of Nine Dragon's outstanding debt due in 2013, Nine Dragons said. |
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