S&P: Shanghai Real Estate unaffected

Standard & Poor's said that its rating on Shanghai Real Estate Ltd. (BB-/stable) would not be affected by the company's announcement that it will issue 212 million new shares and that its major shareholder, Good Times Resources Ltd., will make a share placement of 342 million existing shares and subscribe to the new shares.

The new shares could raise an estimated HK$500 million and the net proceeds are earmarked to replenish the company's land bank and for use as general working capital, S&P said.

The reduction of Good Times' interest will result in a change of control as defined by the bond documents relating to the $200 million guaranteed notes due 2013. Shanghai Real Estate may be required to offer to purchase the notes at 101% of par if either of two rating agencies lower ratings on the company within the next six months, the agency said.

The funds raised from the new shares should help improve Shanghai Real Estate's cash position over the near term and enlarge its equity base, the agency said. However, S&P added that any further aggressive land bank acquisitions or a worse-than-expected financial performance could exert downward pressure on the rating.

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