Fitch drops Meinl to junk

Fitch Ratings said it downgraded Meinl European Land Ltd.'s long-term issuer default rating and senior unsecured rating to BB+ from BBB-. Both ratings have been put on Rating Watch negative.

The short-term issuer default rating has been downgraded to B from F3.

According to the agency, the rating reflects Fitch's view that the issuer's €1.8 billion of share and certificate buybacks in June and July 2007 were an aggressive maneuver and significantly depleted the group's cash reserves, which were intended to fund the €3.7 billion property development program.

This action was compounded by the drop in share price thereafter, Fitch said. Assuming that further equity issuance will be difficult in current market conditions, together with the lack of other committed bank lines, this has left the company with a prospective liquidity shortfall in 2009 if it is to complete its remaining €3.1 billion committed development program, the agency said. Aside from that, the company's property fundamentals are unchanged, Fitch said.

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