(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.