Moody's changes Citic Pacific review to direction uncertain

Moody's Investors Service said it changed the rating review to direction uncertain for Citic Pacific Ltd.'s Ba2 corporate family rating and the Ba2 rating of Citic Pacific Finance (2001) Ltd.'s $450 million bonds, which are guaranteed by Citic Pacific.

These ratings were previously downgraded and placed under review for further possible downgrade on Oct. 21 following the company's report of material losses from leveraged foreign-exchange contracts.

The change in the review follows Citic Pacific's announcement that its major shareholder, Citic Group, has provided a $1.5 billion standby facility and will subscribe to a $1.5 billion convertible bond and take over a significant portion of the outstanding loss-making leveraged foreign-exchange contracts, subject to shareholder approval.

Moody's said these transactions will ease Citic Pacific's short-term liquidity pressure, help stabilize its financial profile and reduce the uncertainty associated with cash flow needs and mark-to-market losses under the contracts.

However, about one-third of the contracts still remain with Citic Pacific, and the company is "deeply" out of money, the agency said.

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