S&P affirms Mandra Forestry

Standard & Poor's said it affirmed the B- corporate credit rating on Mandra Forestry Finance Ltd., along with the B rating on its senior unsecured notes, after receiving confirmation that the company is now in compliance with covenants in bond documents mandating the purchase of 140,000 hectares of forestry assets by May 15.

The outlook is negative.

The company has sufficient funds in collateral accounts in the United States to meet the May 15 interest payment of $11.7 million due on the company's senior unsecured notes, the agency said.

Regulations are a key concern for Mandra, S&P said. While the company has made progress in receiving quota allocations, it does not yet have 100% of the quota allocation needed to meet its intended harvest for 2007 of about 1 million cubic meters. Recently released regulations on investment in forestry assets in China also heighten regulatory risk, the agency added.

Nevertheless, Mandra secured a reduction in its Anhui harvest taxes in fiscal 2007, which S&P said it views favorably.

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