Moody's rates Mandra bonds B1

Moody's Investors Service said it assigned its prospective B1 senior unsecured rating to the proposed bonds to be issued by Mandra Forestry Finance Ltd. and guaranteed by Mandra Forestry Holdings Ltd.

At the same time, Moody's assigned a prospective B1 senior implied rating to Mandra. The outlook is stable.

The bond proceeds will be used to acquire commercial plantations in Anhui Province, China.

The rating reflects Mandra's four credit strengths: 1) the favorable trend in demand for timber logs in China fuels underlying growth; 2) supportive government policies for commercial forestry plantations; 3) the company's established relationships with local city governments and forestry bureaus in Anhui Province; and (4) the participation of Sino-Forest (Ba2/stable) brings operational and management expertise as well as purchase commitments to the project.

At the same time, Moody's said the rating reflects key credit challenges: 1) Mandra's aggressive capital structure; 2) single-product business with a financial profile that is highly sensitive to log price fluctuations, leading to potential refinancing risk; 3) start-up nature of the project and the consequent absence of any operating track record, and 4) some uncertainties surrounding the project, including Mandra's ability to secure plantation ownership, logging quotas and land use rights over the life of the bonds.

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