"The latest development is credit negative for SHKP, as its reputation is now further at risk. Moreover, the Co-Chairmen and senior management could be distracted by the legal proceedings," says Peter Choy, a Moody's Senior Vice President.

But in the near term, Moody's believes that SHKP's operational and financial profile will not be materially affected and therefore says that there will be no change to its A1 rating.

The negative outlook reflects the ongoing uncertainty from the legal case and its potential impact on SHKP.

"Although ICAC has commenced legal actions against SHKP's two Co-Chairmen and a board member, SHKP is not a party under any direct legal or regulatory action," says Choy.

For now, SHKP continues to carry out its business activities without any constraints.

As an example, the Hong Kong government accepted a bid from SHKP among seven bidders for a prime project on Hong Kong Island for HKD6.91 billion (USD886 million) on 11 July. This is the company's second land acquisition in Hong Kong since the Co-Chairmen first came under investigation by the ICAC in March.

"Moreover, SHKP has added two independent non-executive directors to strengthen its board. It has appointed two deputy managing directors to assist the Co-Chairmen and 2 alternate directors to represent the Co-Chairmen in the event they are unavailable for board meetings," Choy says.

The two deputy managing directors are existing long-serving senior managers on the Executive Committee. They are familiar with the strategy, operation, and culture of the organization, and their experience will minimize any disruption and ensure the continuity of SKHP's business strategy.

Such prompt management restructuring further demonstrates the breadth and depth of the company's management team.

Moody's also notes that the company has strong business operations, with cash of HKD9.2 billion at the end of December 2011 and net rental income of about HKD10 billion-HKD11 billion per annum.

Moody's will continue to monitor the progress of the legal proceedings and could take further actions if more adverse developments become evident.

The principal methodology used in this rating was Global Homebuilding Industry Methodology published in March 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Sun Hung Kai Properties Limited is one of Hong Kong's leading property development and investment companies. It had a land bank of 46.7 million square feet in Hong Kong as of December 2011. Of this total, 27.9 million square feet comprised completed investment properties, while the rest remains under-development. In addition, it has over 26 million square feet (site area) of agricultural land.

In China, the company had an attributable land bank of 85.3 million square feet as of December 2011, of which 77.8 million square feet are under development, while the remainder consists of completed investment properties.

Peter Choy Associate Managing Director Corporate Finance Group Moody'sInvestors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Gary Lau MD - Corporate Finance Corporate Finance Group JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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