Less than 48 hours after Sino-Forest Corp. announced that it will not make a crucial interest payment, rating agency Moody's Investor Service declared that it will withdraw the company's debt rating.
On Monday, Sino-Forest said it will not make a $9.775-million (U.S.) interest payment, due Dec. 15, to holders of its convertible notes that mature in 2016.
"This action implies that Sino-Forest will default on this debt obligation," Moody's explained, adding that Sino-Forest has a 30-day grace period to "rectify the payment."
Sino-Forest has been caught up in controversy since short seller Muddy Waters Research LLC released a report in June that alleges the company overstates it revenues and inflates the value of its timber holdings.
Multiple investigations into Sino-Forest's operations have been opened, and on Monday the company said these may impede it from releasing third-quarter results, which would trigger another breach of its debt covenants.
With its future uncertain, the company announced this week that it "may consider obtaining other sources of capital, including through the recapitalization of the company or the sale of some or all of its business."