* Olam says Temasek has stayed invested
* Issues detailed defence on accounting, acquisitions
* Says no insolvency risk, can meet debt obligations
* Shares fall 4 pct to lowest close in 3 1/2 yrs, bonds drop (Updates with CEO comments, adds video and story links)
By Charmian Kok and Anshuman Daga
SINGAPORE, Nov 28 Singapore commodity trader Olam defended its record on accounting and acquisitions and said it had the backing of a key state investor as it seeks to counter criticism from a short-seller which has hammered its shares.
Olam International Ltd, 16 percent owned by Singapore state investor Temasek Holdings Pte Ltd, said in a 45-page report on Wednesday it was not at risk of insolvency and had enough liquidity to pursue its business and future investments.
Olam's report aimed to rebut major issues raised by U.S. based short-seller Muddy Waters in its own report issued the day before, which looked at Olam's solvency, accounting-related assertions, business model, acquisitions and capital spending.
"We believe that the (Muddy Waters) report's assertions are motivated to distract and create panic amongst our continuing shareholders, bond holders and creditors," Olam said.
Olam shares fell nearly 4 percent on Wednesday to their lowest close in three and half years. They have dropped 14 percent since the battle with Muddy Waters began early last week, wiping away nearly half a billion dollars in value.
Olam CEO Sunny Verghese, speaking to about 100 analysts and reporters assembled for a hurriedly called news conference, sought to allay concerns that investors such as Temasek were growing worried over the allegations from Muddy Waters.
"On the Temasek issue you have raised, the only thing I would say is that I am grateful they have stood by us and stayed invested," he said. "For me that is the biggest support."
Temasek spokesman Stephen Forshaw said after Verghese's comments: "We have maintained our position in Olam. We have nothing further add."
Short-sellers like Muddy Waters make money by betting stocks will fall and then buying them back when they are cheaper.
Analysts said Olam still faced doubts in the markets.
"Olam had a point-by-point rebuttal and pointed out quite correctly that there were a few facts that were isolated and taken out of context," said UOB Kay Hian analyst Eugene Ng. "But regardless of whether Muddy Waters' claims are justified, the perception of Olam as a company has been damaged."
Olam's bonds have also been hit hard, with its bonds due in 2017 falling to 85/87 cents on the dollar and its and 2020 bonds slipping to 85.5/88, both about 1 to 2 lower.
"The Olam report addresses some areas well and some areas not so well," said a Hong Kong-based credit analyst at a U.S. bank. "The rebuttal is good enough to prevent a collapse but I can see more exchanges to follow - it will not be an easy week."
Verghese said Olam had not so far bought back any of its shares or bonds. The company last week said it would consider share buybacks after comments by Muddy Waters founder Carson Block sent the price lower.
Verghese also said the company had no plan to raise equity to meet its long-term profit goals.
Muddy Waters, which rose to prominence after attacks on North America-listed Chinese companies, made allegations about irregularities and vulnerabilities at Olam last week and released its detailed 133-page report on Tuesday.
The battle between the two firms, which Olam has escalated to a Singapore court, has cast a spotlight on common accounting practices at commodities firms.
Olam said it has planned for an appropriate capital structure and raised the necessary equity and debt to meet its investment plans.
"We believe that even without raising any further debt we can easily meet our debt repayment obligations and pursue our planned capex (capital expenditure), in addition to meeting the ongoing working capital needs," it said.
"We also have the option of phasing out some of our fixed capital investments if the debt markets completely dry up for some reason."
Olam said gains generated from accounting for negative goodwill in certain acquisitions, which were highlighted in Muddy Waters' report, are treated as exceptional and are excluded when reporting core operational profits.
CIMB analyst Lee Wen Ching said the Muddy Waters report provided sensational headlines but little new information.
"We think this report exaggerates the negatives, most of which are already known by the market, rather than bringing up new concerns," she said.
Olam, started by the Kewalram Chanrai Group in Nigeria, began as a trader of agricultural commodities with interests ranging from cocoa and coffee to nuts and sugar.
It has been diversifying into new areas in recent years through acquisitions and now owns plantations and processing plants around the world. (Additional reporting by Saeed Azhar in Singapore and Nishant Kumar in Hong Kong; Editing by John O'Callaghan, Edmund Klamann and Mark Potter)