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Nine Dragons denies S&P allegations, shares to resume trade

Nine Dragons denies S&P allegations, shares to resume trade
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First Published: Wed, Jun 15 2011. 12 47 PM IST
Updated: Wed, Jun 15 2011. 12 47 PM IST
Hong Kong: Nine Dragons Paper (Holdings) Ltd said it has not received any written information requests from Standard & Poor’s to which it has not responded, and denied having an aggressive debt-funded growth appetite.
Trading in the company’s shares would resume on Wednesday afternoon, it said in a statement.
Nind Dragons shares plunged more than 17% on Tuesday prior to a trading suspension after Standard & Poor’s withdrew its ratings on the company and its notes, sending the stock to a two-year low.
On Tuesday, the international credit rating agency pulled its ratings on Nine Dragons, controlled by China’s wealthiest woman Cheung Yan, saying it had a lack of access to management to understand the company’s strategy and credit risks.
Analysts said the fall was partly fuelled by investor concern over corporate governance issues surrounding a number of U.S.-listed Chinese companies.
“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,” Cheung, known in China as Zhang Yin, said in a filing to the Hong Kong stock exchange.
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. The outstanding principal amount of Nine Dragons’ 2013 notes was $47.575 million as of June 14.
“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.
“The market has overreacted to S&P’s rating withdrawal as Nine Dragons’ operations remain normal,” said Yeung, whose view was shared by several other securities analysts.
Shares of Nine Dragons Paper (Holdings) Ltd, rebounded sharply on Wednesday after it rebutted claims from ratings agency Standard & Poor’s, which sent shares in the company diving a day earlier.
Nine Dragons denied S&P’s statement that it had an aggressive debt-funded appetite for growth and said it had not received any written information requests from the agency to which it had not responded.
Nine Dragons, a major pulp and specialty board products maker in China, saw its shares jump as much as 14% cutting losses of as much as 22% incurred on Tuesday after S&P withdrew its ratings on the company and its notes.
The stock was suspended from trading on Tuesday afternoon and resumed trading at 11 am on Wednesday. As of 12 am, the stock was up 10.6 % at HK$6.25 after hitting a high of HK$6.43.
“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,” Cheung, known in China as Zhang Yin, said in a filing to the Hong Kong stock exchange.
.The outstanding principal amount of Nine Dragons’ 2013 notes was $47.575 million as of June 14. The company has a net debt-equity ratio of more than 100 percent in 2011, according to HSBC and DBS research reports.
“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.
Nine Dragons said Fitch Ratings had not indicated any communication issues with the company’s management, nor had it withdrawn its ratings. It had also received a proposal from Moody’s Investor Services and expected to finalise the appointment shortly.
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First Published: Wed, Jun 15 2011. 12 47 PM IST