HSBC, a lender to mainboard-listed China Fishery Group, has gone to court to seek the winding up of the industrial fishing firm with operations in Peru, Russia and Africa.
The bank has filed an application to the High Court of Hong Kong seeking the appointment of provisional liquidators to the company.
A related company - China Fisheries International - is also facing similar action by the bank, according to a report by Reuters.
Ratings agencies Standard & Poor's (S&P) and Fitch Ratings both lowered their credit ratings on the company yesterday following the bank's wind-up petition.
"We downgraded China Fishery to 'SD' (selective default) because we believe the company failed to repay a US$31 million (S$43.6 million) principal instalment on its US$650 million club loan facility due earlier this month," said S&P credit analyst Lillian Chiou.
S&P pointed out that China Fishery's low cash balance and weak operating performance at its Peruvian operation mean that it is unlikely to meet the instalments of its club loan in the next 12 months.
A meaningful recovery in its operating cash flows is also unlikely because the total allowable catch in Peru is low for this season, less than half of the amount in the previous season, the ratings agency said.
Fitch downgraded China Fishery's issuer default rating to C from B-.
Its senior unsecured rating and the rating on its US$300 million senior unsecured notes issued by CFG Investment SAC were also downgraded, to C from B-.
If HSBC's petition is successful, China Fishery will be liquidated and its ratings will then be further downgraded to D, said Fitch.
The turn of events came after the troubled group was put under investigation by market regulators here and in Hong Kong in August.
China Fishery and its parent, mainboard-listed Pacific Andes Resources Development, are facing a probe by the Monetary Authority of Singapore and white-collar crime investigation agency Commercial Affairs Department for a possible breach of the securities law.
Among other things, the Securities and Futures Act deals with market misconduct, such as making or disseminating false or misleading information, market manipulation and insider trading.
Pacific Andes Resources Development's parent, Pacific Andes International Holdings, is facing an investigation by the Hong Kong securities regulator.
News of the probe had sent the share prices of both China Fishery and Pacific Andes Resources Development tumbling to a record low of five cents and 2.1 cents on Aug 25. They have since recovered slightly.
Shares of China Fishery closed at 7.6 cents on Wednesday, before trading was halted yesterday.
The troubled fishery group of companies, one of the world's largest seafood groups, has been trying to resolve its substantial debt problem and get back on track after political troubles in Russia.
China Fishery reported a net profit of US$2.8 million for the three months ended June 28, down 85.5 per cent from US$19.6 million. This was mainly due to lower sales of products from its Peruvian fishmeal operations.