Olam

Olam: says it has initiated legal action in a Singapore court against short-seller Carson Block and his research firm Muddy Waters LLC, for statements which caused its shares to plunge earlier this week, on grounds of alleged "libel and slander" and the company is seeking damages based on the advice of its lawyers. Dukas PR, an external communications agency hired by Muddy Waters, said that the research firm hasn't seen the lawsuit but both the company and Mr. Block are "always ready to defend our views vigorously." Recall. Mr. Block, the founder of Muddy Waters, said Monday at a conference in London he was betting against Olam, and questioned the firm's accounting methods. On Tuesday, Olam CEO Sunny Verghese defended the co's accounting and said that he felt Mr. Block's statements alleging improper accounting standards at Olam were a "very concerted and unfair attack on the company." Muddy Waters then said in an open letter posted on its website and addressed to Olam's CEO and board members that it stood by Mr. Block's comments. The key points Mr. Block raised at the Ira Sohn investment conference in London relate to Olam's debt load and its reporting of biological gains on investments. Olam's debt totaled $8.4b in 1QFYJun13, +12% qoq and more than quadruple the $1.9b in 2007. The recent increase in borrowings has pushed the debt-to-equity ratio, up to 2.03 in 1QFY13, compared with 1.81 in the preceding three months. But Olam said in its post-earnings presentation that its adjusted debt-to-equity ratio, counting inventory as cash, was much lower, at 0.57%. Meanwhile, Citi says Olam's $640m in biological assets is about 5% of assets and 19% of the firm's equity and even if the value was halved, it won't be at risk in terms of banking covenants and gearing limits.