Saying China Aviation Oil (CAO) was effectively insolvent after its disastrous run in derivatives trading, Xinhua Far East China Ratings downgraded its credit rating from A (pi) to C (pi), the agency's lowest rating. CAO is China's biggest oil trader and biggest mainland company listed on the Singapore's stock exchange. In an announcement reminiscent of the Barings Bank collapse, CAO this week revealed it had run up losses of US$550m from speculative derivatives trading more than three times CAO's US$150 million in shareholders'equity. Even if lead shareholder, China Aviation Holding Co Ltd ("CAOHC") supports its core business and restructuring, "the enormous debts involved suggest that any viable restructuring plan will inevitably require CAO's creditors to bear substantial credit losses," Xinhua Far East said.
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