19.11.2012 08:25
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Shanghai Ind. Urban Development Group Ltd. -- Moody's: SIUD's proposed consent solicitation has no rating impact

Hong Kong, November 19, 2012 -- Moody's Investors Service says that Shanghai Industrial Urban Development Group Limited's ("SIUD") proposed consent solicitation has no impact on its B1 corporate family rating and B2 senior unsecured rating.

The ratings outlook remains stable.

The company announced on 15 November 2012 a proposed consent solicitation with respect to amendments on the definition of asset disposition, limitation on indebtedness, and the terms of an existing cross-guarantee agreement.

The purposes of the amendments are to allow SIUD to rationalize its assets and improve liquidity.

"If the consent is approved by bond holders, it would allow SIUD to dispose of undeveloped or partially developed projects that are not compatible with its updated business strategy," says Franco Leung, a Moody's AVP/Analyst, adding, "The move is credit positive as SIUD needs to undergo some rationalization to improve its business."

SIUD's latest business strategy is to focus its resources on property development projects in the Yangtze River Delta region, where it can leverage on the influence of its parent, Shanghai Industrial Holdings Limited, a conglomerate majority-owned by the Shanghai Municipal Government.

"The proposed asset disposals will address SIUD's needs in the areas of funding and debt refinancing", says Leung, also lead analyst for SIUD.

The proposal to amend the definition of asset disposals will not materially affect the interest of bond holders because SIUD will remain obligated to the covenants in the bond indenture controlling the use of proceeds from asset disposals.

The amendment will facilitate the liquidation of certain assets and funding of new developments and debt refinancing.

The proposed amendment on limitations on indebtedness offers an opportunity for SIUD to refinance maturing offshore debt through pledged onshore deposits. This form of financing is more efficient and less costly than remitting dividends to settle maturing foreign debt.

Moody's notes that the rise in additional bank deposit secured indebtedness will increase subordination risk for bond holders. However, Moody's expects SIUD's latest business plan will keep its secured and subsidiary debt to total assets ratio at around 15% -20%, a level appropriate for its current bond rating of B2, which is already notched down from its B1 corporate family rating.

Moody's does not expect any significant financial impact from the amendment of the terms of the cross-guarantee agreement between Shanghai Urban Development, a subsidiary of SIUD, and Shanghai Xuhui State-owned Assets Management Co., Ltd. SIUD has proposed extending the expiry of the cross-guarantee arrangement to December 2015 from December 2012.

Though the expiry date is now 3 years later, the amount has fallen to RMB400 million from RMB1.2 billion.

The principal methodology used in rating SIUD was the Global Homebuilding Industry Methodology published in March 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

SIUD is a Chinese property developer engaged in residential and mixed-use developments. After the acquisition of SUD (from its parent, Shanghai Industrial Holdings Limited ("SIH", unrated), SIUD accumulated a total of 25 projects across 13 cities in China and a land bank of 17.2 million sqm in aggregate GFA .

After the acquisition of SUD, SIUD became 70% owned by SIH, a Chinese conglomerate majority-owned by the Shanghai municipal government. Listed on the Stock Exchange of Hong Kong in 1996, its main business interests are in real estate, infrastructure facilities and consumer products.

Franco LeungAsst Vice President - Analyst Corporate Finance Group Moody'sInvestors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Gary Lau MD - Corporate Finance Corporate Finance Group JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.

Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.

This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.

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