Fitch cuts Shanghai Zendai

Fitch Ratings said it downgraded Shanghai Zendai Property Ltd.'s long-term foreign-currency issuer default rating to B from B+, along with its foreign-currency senior unsecured rating and dollar-denominated senior unsecured notes rating to B from B+. The recovery rating is RR4.

The outlook is negative.

The downgrade reflects Zendai's weak financial management in an increasingly difficult funding environment, Fitch said.

Fitch noted that increasingly tight credit conditions in 2011 will constrain the ability of smaller borrowers to obtain debt funding.

Since the beginning of 2011, Zendai has not raised any new debt from capital markets and is becoming increasingly dependent on contracted sales and other asset sales to meet its financial obligations, the agency said.

This leaves the company exposed to the weakening property market conditions, which are driven primarily by the increasingly onerous regulatory environment, Fitch added.

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