S&P drops Meinl to junk

Standard & Poor's said it lowered the long-term corporate credit rating on Meinl European Land Ltd. to BB+ from BBB- and the short-term corporate credit rating to B from A-3. The ratings were removed from CreditWatch where they had been placed with negative implications on Sept. 5.

The outlook is negative.

The rating action follows the company's unexpected decision to repurchase share certificates for about €1.8 billion during the second and third quarters of 2007, just months after issuing €1.5 billion worth of shares. The decision led to widespread loss of confidence among both equity and debt investors, according to the agency.

This confidence crisis is likely to harm the company's chances of raising additional equity to fund its ambitious growth plans and also exposed an apparent lack of board oversight and sufficient independence within the company's corporate structure, S&P said.

The company enters a period of very high growth, with material execution and development risks attached, and the funds spent on the buybacks provided a much needed cushion against these risks, the agency said.

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