The ratings outlook remains stable.

The company announced on 15 November 2012 a proposed consent solicitation with respect to amendments on the definition of asset disposition, limitation on indebtedness, and the terms of an existing cross-guarantee agreement.

The purposes of the amendments are to allow SIUD to rationalize its assets and improve liquidity.

"If the consent is approved by bond holders, it would allow SIUD to dispose of undeveloped or partially developed projects that are not compatible with its updated business strategy," says Franco Leung, a Moody's AVP/Analyst, adding, "The move is credit positive as SIUD needs to undergo some rationalization to improve its business."

SIUD's latest business strategy is to focus its resources on property development projects in the Yangtze River Delta region, where it can leverage on the influence of its parent, Shanghai Industrial Holdings Limited, a conglomerate majority-owned by the Shanghai Municipal Government.

"The proposed asset disposals will address SIUD's needs in the areas of funding and debt refinancing", says Leung, also lead analyst for SIUD.

The proposal to amend the definition of asset disposals will not materially affect the interest of bond holders because SIUD will remain obligated to the covenants in the bond indenture controlling the use of proceeds from asset disposals.

The amendment will facilitate the liquidation of certain assets and funding of new developments and debt refinancing.

The proposed amendment on limitations on indebtedness offers an opportunity for SIUD to refinance maturing offshore debt through pledged onshore deposits. This form of financing is more efficient and less costly than remitting dividends to settle maturing foreign debt.

Moody's notes that the rise in additional bank deposit secured indebtedness will increase subordination risk for bond holders. However, Moody's expects SIUD's latest business plan will keep its secured and subsidiary debt to total assets ratio at around 15% -20%, a level appropriate for its current bond rating of B2, which is already notched down from its B1 corporate family rating.

Moody's does not expect any significant financial impact from the amendment of the terms of the cross-guarantee agreement between Shanghai Urban Development, a subsidiary of SIUD, and Shanghai Xuhui State-owned Assets Management Co., Ltd. SIUD has proposed extending the expiry of the cross-guarantee arrangement to December 2015 from December 2012.

Though the expiry date is now 3 years later, the amount has fallen to RMB400 million from RMB1.2 billion.

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

SIUD is a Chinese property developer engaged in residential and mixed-use developments. After the acquisition of SUD (from its parent, Shanghai Industrial Holdings Limited ("SIH", unrated), SIUD accumulated a total of 25 projects across 13 cities in China and a land bank of 17.2 million sqm in aggregate GFA .

After the acquisition of SUD, SIUD became 70% owned by SIH, a Chinese conglomerate majority-owned by the Shanghai municipal government. Listed on the Stock Exchange of Hong Kong in 1996, its main business interests are in real estate, infrastructure facilities and consumer products.

Franco LeungAsst Vice President - Analyst 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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