* Olam doesn't expect to raise debt for at least 5-6 months
* Muddy Waters finds fault with Olam's acquisition spree
* Olam says will fight to protect reputation
(Adds comments from interview, background)
By Anshuman Daga
SINGAPORE, Nov 29 Singapore commodity trader
Olam International Ltd, under attack by short-seller
Muddy Waters for its aggressive spending and debt levels, has
sufficient cash and does not expect to tap the debt markets for
at least five to six months, its chief executive said.
"We are very comfortable with our balance sheet position, in
terms of our equity position as well as our debt position,"
Sunny Verghese told Reuters in an interview on Thursday.
Verghese, who described assertions from Muddy Waters LLC
that the company is teetering on the brink of failure as "a bolt
from the blue", said Olam's lenders, investors and trading
partners were standing by it.
Olam has sued Muddy Waters in a Singapore court and issued a
detailed rebuttal saying it was not at risk of insolvency and
had enough liquidity to pursue its business and investments.
Singapore state investor Temasek Holdings Pte Ltd,
which owns 16 percent of Olam, has said it maintained its
position in the company.
Asked when Olam was likely to tap the markets at the
earliest, Verghese said: "Definitely not in the next five to six
The company has borrowed heavily to fund its expansion from
trading into the actual production and processing of
agricultural commodities from cotton to coffee to cashew nuts,
and the bond markets have grown jittery over its debt, which
totalled S$8.4 billion ($6.9 billion) at the end of September.
Olam's most liquid bond, its 5.75 percent bond issued in
September and due in 2017, has been hovering near
a lifetime low in recent days. It was quoted around 85 cents on
the dollar and yielding above 9.5 percent on Thursday.
Muddy Waters said in a 133-page report early this week that
Olam's highly levered balance sheet, low operating margins and
continued capital expenditures and acquisitions would require it
to raise more money and put it in a precarious financial state,
but Verghese said his company's liquidity position was solid.
"We have S$1.38 billion in cash, we have S$5 billion in
liquid hedge inventories and readily marketable inventories that
can be converted into cash at a moment's notice," the 53-year
old Verghese said at Olam's headquarters in Singapore's
"We have got S$4.33 billion of unutilised credit lines. So,
we have got S$10 billion of liquidity. So, the risk of a
solvency situation is a far-fetched thing."
The rise in bond yields would boost Olam's borrowing costs
from banks, although market participants were not alarmed about
its long-term outlook in the wake of Muddy Waters' attacks.
Muddy Waters makes money by betting against the share prices
of companies it targets with often devastating research reports
and until recently aimed mainly at China-based firms. Some of
the reports crushed shares of the targets, although others were
able to recover.
"We value Olam on a liquidation basis because our opinion is
that it is likely to fail," Muddy Waters said in its report this
week, which was quickly followed by Olam's detailed rebuttal.
Olam's shares managed a 4 percent bounce on Thursday from
their lowest close in three-and-a-half years the previous day,
as the market assessed the efforts to reassure investors. The
share price has fallen as much as 16 percent since the battle
with Muddy Waters began early last week, wiping away nearly half
a billion dollars in market value. On Thursday, Olam's market
capitalisation was about $3 billion.
"When a lot of mud like this is thrown, a lot of people will
take the view, 'sell first, we'll ask questions later,' which is
precisely the impact these aggressive claims were hoping to
make," said Verghese, who was mandated by the Kewalram Chanrai
Group to start Olam in 1989 to build an agricultural company.
"But if there is an allegation of dishonesty or (lack of)
integrity, then we will have to be vigorous about protecting our
Olam, which competes with larger rival Louis Dreyfus Corp
and other commodity companies including Noble Group
Ltd and Wilmar International Ltd, has been
aggressive in global acquisitions in recent years.
Its expansion drive has included a dairy business in
Uruguay, almond plants in Australia and a greenfield urea
project in Gabon.
"We've followed a deliberate strategy of doing a lot of
small string-of-pearls kind of acquisitions and that is why we
do so many acquisitions," Verghese said.
He rejected Muddy Waters' allegations that its overseas
projects were falling short, saying that 32 of its 36
acquisitions were performing "at or above investment thesis".
($1 = 1.2233 Singapore dollars)
(Additional reporting by Umesh Desai in HONG KONG; Editing by