TEXT-Fitch: No immediate rtg impact on Sun Hung Kai from charges against directors

Mon Jul 16, 2012 3:21am EDT

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(The following statement was released by the rating agency)

July 16 - Fitch Ratings says that the charges laid against three senior executives of Sun Hung Kai Properties Limited (SHKP, rated 'A'/Stable/'F1') by Hong Kong's Independent Commission Against Corruption (ICAC) on 13 July 2012 have no immediate impact on its ratings.

Fitch notes that the charges are against the Directors as individuals, and not against the company. The company's day-to-day operations are managed by a team of professionals, and it has announced a plan that Fitch views would maintain current operations even if the Directors charged are no longer able to discharge their duties.

Fitch may consider negative rating actions if further developments related to the charges against the Directors adversely affect SHKP's operations and financials. These developments may include:

-SHKP itself being charged and its business operations facing sanctions or restrictions, including but not limited to imposition of punitive fines, suspension from participation in government land auctions or assets freeze

-SHKP facing higher borrowing costs or difficulty in raising new funds

Fitch has been informed by SHKP management that none of the above events has occurred.

Fitch also notes that SHKP has significant headroom to maintain its current ratings. The company's liquidity strength remains intact; it had a cash balance of HKD9bn and ample committed unutilised credit lines against short-term debt of HKD18.71bn at end-2011. SHKP raised approximately HKD9bn bonds for refinancing and working capital purposes in Q3FY12 (financial year end June) and achieved property sales of HKD37bn for FY12. It also continues to replenish its land bank, most recently winning the auction for a land plot with 0.9 million sq. ft. of gross floor area in North Point on 11 July 2012 at a bid of HKD6.91bn.

On 13 July 2012, SHKP's joint Chairmen and Managing Directors, Thomas Kwok and Raymond Kwok, and an Executive Director, Thomas Chan, were charged in relation to an alleged offence or offences for conspiracy to commit misconduct in a public office, and/or under the Prevention of Bribery Ordinance and/or furnishing false information contrary to the Theft Ordinance. On the same day, the company announced that its board had appointed two other Executive Directors as Deputy Managing Directors; and the Chairmen's sons as alternate Directors.

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