Fitch downgrades Sino-Forest

Fitch Ratings said it downgraded Sino-Forest Corp.'s long-term foreign-currency issuer default rating and senior unsecured debt rating to BB- from BB+ and placed the ratings on Rating Watch negative.

The downgrade is primarily driven by the fact that the company does not currently have direct access to the profits of its main operating subsidiaries due to complexities in its corporate structure, Fitch said.

The company is improving its operating cash flow access by growing the asset base of its onshore incorporated subsidiaries, partly by large scale forest replanting, the agency said.

But this transformation is a gradual process that will take years to achieve and the company remains vulnerable to refinancing risk if a solution to access the profits of its subsidiaries is not found, Fitch said.

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