Olam

Olam: requests for trading halt. Insists there is no substance in Muddy Waters’ broad allegations. Says it will continue to study the rpt in greater detail and will provide a fuller response in due course. Says it will clear its name and hold Muddy Waters accountable for their damaging actions. Meanwhile, bonds of Olam are approaching levels considered “distressed” after research firm Muddy Waters likened the co to Enron and said it is likely to fail. Olam’s unrated US$500m of 5.75%, 5-year notes issued at par in Sep have tumbled to 86.5 cts on the dollar to yield 9.3%, according Bloomberg data. Average yields on junk-rated notes, ranked below Baa3 by Moody’s and lower than BBB- at S&P, are 7.04%. Muddy Waters, founded by short seller Carson Block, rated Olam a strong sell in a 133-page report published yday. The research firm says Olam uses non-cash accounting gains to boost its earnings, has been “burning cash” and will need to raise or refinance as much as $4.6b of debt over the next year to remain solvent. “There is just a lot of uncertainty around the name and I think right now simply nobody knows whether Olam or Muddy Waters is right,” says a money manager at Mirante Fund Management. OCBC is in process of reviewing its Hold call and TP $1.80, expects share px volatility to persist until Olam can propvide a more substantial response that addresses the specific issues raised by Muddy Waters. UOBK however believes barring outright fraud, Muddy Waters’ concerns could be overblown. Maintains Buy with TP $2.38. Olam shares dropped 9.8% to US$1.19 in OTC trading in New York yday. They have declined 10% in Singapore since Block first talked about his short position. Olam supplies 21 products from cocoa to rubber from 65 countries to 12,300 customers. It’s one of the world’s top six cotton traders. Temasek is Olam’s second-largest shareholder with a 16.3% stake.