Published March 4, 2009

S&P cuts CapitaLand's long-term outlook

Unsolicited rating is misleading without our input: developer

By KALPANA RASHIWALA

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STANDARD & Poor's Rating Services yesterday revised its outlook on the BBB+ long-term unsolicited corporate credit rating on property giant CapitaLand to negative from stable.

Outlook negative: S&P says Capitaland will continue to face earnings pressure

'At the same time, the rating on CapitaLand was affirmed before being withdrawn,' S&P said in a release.

S&P said that without full interaction of the company in the rating process, it is no longer able to provide an informed credit opinion based on publicly available information.

When contacted, a CapitaLand spokesman said: 'There is neither merit nor basis for us to comment. This kind of unsolicited rating is highly undesirable and misleading when it is done without the company's input.'

In its release, S&P said: 'Under the current volatile environment, a comprehensive understanding of the company's strategic and commercial response to the slowdown in the residential and commercial property business in its core markets is an important credit consideration.'

It added that its negative outlook reflects its opinion that 'CapitaLand's profitability will continue to face pressure as a result of lower revenues from residential development projects in its core markets, as well as the negative outlook in general for commercial properties in the region'.

S&P has also affirmed its BBB unsolicited rating on three series of convertible bonds issued by CapitaLand - the $430 million, 2.10 per cent bonds due 2016; $1.0 billion, 2.95 per cent bonds due 2022; and the $1.3 billion, 3.125 per cent bonds due 2018. 'Following the affirmation, the ratings on the convertible bonds have also been withdrawn,' S&P said.

Last month, CapitaLand said fourth-quarter net earnings fell 88.4 per cent to $77.96 million, while full-year 2008 net profit slipped 54.3 per cent to $1.26 billion. Return on equity fell from 31.9 per cent in 2007 to 12.2 per cent last year. Yesterday, the stock rose 5 cents to close at $1.85.