Standard and Poor's downgraded the debt rating of China's Sino-Forest Corp. and then withdrew its ratings altogether, saying it believed fraud allegations against the firm would stick.
S&P cut Sino-Forest's long-term corporate credit rating as well as its rating on its senior unsecured notes and convertible bonds from 'B' to 'CCC-', and then pulled the ratings due to "heightened information risks."
"We lowered the rating on Sino-Forest partly because we believe recent developments point towards a higher likelihood that allegations of fraud at the company will be substantiated," said S&P credit analyst Frank Lu.
"The downgrade also reflects our opinion about the severity of the difficulties the company now faces in operating its existing business and our view that the pressure on liquidity has increased."
Lu added that the company had "declined to share the interim results of an independent committee's investigation" into its possibly illicit dealings.
Sino-Forest operates in China but is listed in Toronto, Canada's main bourse.
The Ontario Securities Commission suspended trading in Sino-Forest shares on Friday, saying the firm and its executives "appear to have misrepresented some of its revenue and/or exaggerated some of its timber holdings."
Faced with the mounting allegations, chairman and CEO Allan Chan resigned on Sunday.
The problems at Sino-Forest are the latest in a series of accounting scandals involving Chinese firms listed in North America, which have prompted trading halts, probes by US and Canadian regulators, and falling stock prices.
The Ontario Securities Commission is pursuing its investigation into the firm, which began a few months ago when Muddy Waters Research, a Hong Kong-based firm run by Carson Block, said the company had cooked its books.
The Muddy Waters report led to a 60 percent plunge in the value of Sino-Forest shares.
Moody's also lowered its debt rating for Sino-Forest on Monday, from 'B1' to 'Caa1', saying the halt in trading, Chan's resignation and the ongoing probes had added "significant negative pressure" on the group's operations.
Sino-Forest, which was founded in 1994, posted 41 percent average annual growth in its turnover from 2005 to 2010.