This rating action concludes the rating review which was initiated on 12 June 2012.

The ratings outlook is negative.

RATINGS RATIONALE

"The ratings upgrade reflects the view that Wharf (Holdings) Limited's investment in Greentown has helped stabilize the latter's weak financial conditions," says Jiming Zou, a Moody's Analyst.

Wharf has injected cash of about RMB4.2 billion into Greentown through its purchase of new equity and convertible bonds. Such an inflow of cash will help Greentown deal with its debt repayments.

As a consequence, Wharf now holds 24.6% of Greentown and is its second largest shareholder with 2 non-executive directors on its board.

Most importantly, Wharf can now review Greentown's new projects and financial management, therefore ensuring that the company adheres to a disciplined approach.

In its investment agreement with Wharf, Greentown has to stay below a 100% ceiling on net gearing. Wharf aims to restore Greentown's financial flexibility.

Currently, Greentown plans to reduce its debt leverage through asset disposals. Projects are being sold to joint ventures with investors such as Sunac China Holdings Limited and Wharf. Through a sale to a joint venture with Sunac, Greentown is expected to receive cash of RMB2.4 billion in 2H 2012.

In 1H 2012, Greentown had already reported a fall in gross debt of about RMB5 billion to RMB27 billion because of asset disposals and the first tranche of the share subscription taken by Wharf. Moody's expects further falls in debt in 2H 2012 as assets are sold.

"Greentown's improved sales execution in 2012 is also credit positive to its B3 rating," says Zou. "Its favorable sales reflect its strong brand, quality products and good competitive position in the Yangtze River Delta, all of which support its B3 rating."

In the first seven months of 2012, Greentown secured contract sales of RMB26 billion (including joint venture projects), or 65% of its target of RMB40 billion for all of 2012.

During 1H 2012, Greentown had 93 projects across 24 cities. The pre-sale average selling price for 1H 2012 was RMB18,744 per square meters, representing a mild decline of 11.4 % year on year.

Moody's expects Greentown to increase its property deliveries in 2H 2012. With improving sales , it will likely strengthen EBITDA/Interest coverage to around 2.5x from 1.7x in 2011.

"On the other hand, Greentown still needs to demonstrate its ability to manage down its inventory and improve its debt maturity profile, which together pressure its ratings," says Zou.

As of 30 June 2012, completed and under-development inventory amounted to RMB65.9 billion, a level which is high relative to its annual contract sales on wholly or majority owned projects.

This work-down of its inventory entails Greentown revising its product strategy to meet the strong demand for mass market products.

Its short-term debt of RMB18.5 billion in June 2012 was also high relative to its cash position of around RMB7.3 billion (including pledged deposits).

The negative outlook reflects the challenge of working down its inventory in an uncertain property market. It also reflects the need for Greentown to stabilize its funding base through obtaining long-term financing, which could be challenging, given its still weak financial position

The ratings could return to stable, if Greentown (i) achieves its targets for both contract sales and recognized revenues; (ii) reduces inventory; (iii) reduces short -term debt to a more manageable level; and (iv) further deleverages through asset disposals, such that Adjusted Debt/Capitalization falls below 60% and EBITDA/interest stays around 2.5x.

The ratings would be downgraded, if Greentown suffers a material decline in its balance sheet liquidity due to slow sales, tighter bank credit, or increased debt-funded land payments.

The principal methodology used in rating Greentown China Holdings Limited 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.

Wharf (Holdings) Limited is listed on the Hong Kong Stock Exchange. The principal business activities of the Wharf Group are ownership of properties for development and letting, and investment. It also owns container terminals as well as businesses in communications, media and entertainment.

Greentown China Holdings Limited is one of China's major property developers, with a primary focus in Hangzhou city and Zhejiang Province. As at 30 June 2012, the company had 99 projects, including those under construction and available for construction, with a total GFA 40.08 million sqm. Of this total, 23.07 million sqm were attributable to the company.

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Jiming Zou 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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