(The following statement was released by the rating agency)
Oct 01 - Fitch Ratings says the investigation of China Fishery Group Limited's
(China Fishery, 'BB'/Stable) North Pacific operations by the Russian authorities will not have
any immediate rating impact.
Fitch considers that China Fishery's ratings have factored in the regulatory
risks it faces in the jurisdictions it operates. No actions have been taken by
the Russian authorities against China Fishery and the company continues its
operations in the North Pacific. The company has said that its fish supply
arrangements are in full compliance with all relevant Russian laws and
regulations. China Fishery's long operating history in the North Pacific since
2001 have profited both the company and Russian fishermen. Fitch believes any
changes to the operating environment of fishing Alaskan Pollock in Russia are
likely to be gradual rather than disruptive since the livelihood of Russian
fishermen too would be affected.
Fitch recognises that the Russian incident may generate risks, albeit not
imminently, to China Fishery's operational flexibility in the North Pacific.
This may result in reduced profitability or a substantial loss of its operating
scale in this region. The agency has indicated that events leading to a
crippling of its fishing fleet operation, resulting in a sustained reduction of
its operating scale may lead to negative rating pressure. Fitch will continue to
closely monitor the Russian investigation.
Should these risks materialise, Fitch expects to downgrade China Fishery by no
more than one notch. This is because the company's Peruvian and South Pacific
operations are still of a sizable scale, generating a total EBITDA of around
USD100m per annum. Fitch estimates that this will result in China Fishery's net
debt/EBITDAR being sustained below 2.0x, assuming all its outstanding
prepayments to its Russian partners are recovered. Furthermore, Fitch expects
China Fishery's operations, even without contributions from the North Pacific,
to remain positive in free cash flow generation.