An influential US research firm on Tuesday said Singapore-based farm commodities giant Olam International faced a "significant risk" of default and likened it to failed energy trader Enron Corp.
Muddy Waters LLC released a scathing 133-page report on Olam despite a lawsuit filed against it by the company, which reported a turnover of Sg$15.73 billion ($12.30 billion) in its last financial year ending June 30.
Shares of Olam closed 6.0 percent lower after the report was released. The company again rejected the allegations made by Muddy Waters about its financial health and accounting practices.
"We value Olam on a liquidation basis because we believe its value is less than its debt, and that it is at significant risk of defaulting on its obligations," the report said.
"In the event of bankruptcy, our recovery model shows that recoverable assets for unsecured creditors of Olam would likely be 45.8 cents to the dollar."
Muddy Waters likened Olam to Enron, alleging they used similar accounting techniques to value gains.
Enron collapsed in spectacular fashion in 2001 amid wide-ranging government and congressional probes into its accounting practices in one of the biggest scandals in US corporate history.
"We believe that the single biggest factor in Enron's collapse was its use of accounting techniques similar to Olam's value gains," the report said.
"Both companies appear to have tried to scale their trading businesses too far and too fast, which resulted in substantial cash burns."
In a statement, Olam said it had read the report and found "that there is no substance in their broad allegations".
"Olam has complete confidence in its strong, differentiated business model, which has allowed us to build leadership positions in various businesses," it said, adding that its accounting practices are "fully compliant" with global standards.
"We will clear our name and hold Muddy Waters accountable for their damaging actions," Olam warned.
Olam last week sued Muddy Waters and its founder Carson Block at the Singapore High Court, citing "slander, libel and/or malicious falsehood".
Block, an influential short-seller, had told an investment conference in London earlier that Olam could collapse due to its debt load and other factors.
Muddy Waters has said it will "vigorously" defend itself against the lawsuit.
Olam sources 44 products from 65 countries and supplies them to more than 11,600 customers. Key products include cocoa, coffee, cashew, sesame, rice, and cotton and wood products.
Singapore's state investment firm Temasek Holdings is one of Olam's biggest shareholders, owning 16 percent as of March 31.
Block's assessments of companies have been closely monitored, especially after Chinese timber supplier Sino-Forest Corp filed for bankruptcy protection following a 2011 Muddy Waters report that questioned the value of its assets.