Chinese Estates Holdings has been assigned a BBB-minus long-term credit rating by US-based Standard & Poor's, the first rating offered on the property investment company. The rating was done at the request of the company, and observers said Chinese Estates might be exploring financing alternatives, including a convertible bond issue in the near future. Lam Kwong-wai, financial controller for Chinese Estates, said the company might raise cash to fund its $4 billion redevelopment project at Tai Yuen Street in Wan Chai. 'The total investment costs are about $4 billion, but we will probably need only $1.6 billion for the first phase of the project. The second and third phases will be financed by the proceeds from the first.' The rating puts the company within the investment grade category, but just. BBB-minus is the minimum rating most investors would look for, and Alan Lau, associate director of corporate ratings at Standard & Poor's, said it reflected Chinese Estates' ability to meet repayment obligations. Chinese Estates, controlled by Lau brothers Joseph and Thomas, is involved mainly in property investments and has a stable stream of rental income from short leases of three to six years. Its track record in the property sector was relatively short, while the size of its operations was moderate, Alan Lau said. 'The series of privatisations and restructures within the group over the past years may have negatively impacted investors' confidence in the company,' he added. 'The impact of this negative sentiment may affect the company's access to the equity market, and thus to a modest extent reduce its financial flexibility.' Most of the company's 1.7 million sq ft office and commercial portfolio is concentrated on Hong Kong Island - in Central, Wan Chai and Causeway Bay. Chinese Estates' exposure to the volatile Chinese property market is modest, comprising about 5 per cent of the company's total assets. Some Chinese projects already were generating returns, Standard & Poor's said. The company was also involved in 'opportunist' asset trading, the rating agency said. For example, the company disposed of the bulk of its investment in a manufacturing company in February 1996 after acquiring it late last year. Analysts generally welcomed the company's move in requesting a credit rating, saying it would increase the confidence of potential investors in the firm's debt. A credit analyst from a European brokerage said: 'To have a rating is better than not having any at all, and if the rating is good, the funding costs of the company will be substantially reduced. 'Having said that, with a BBB-minus the company will have to offer an attractive price if it wishes to tap the debt market.' Ivan Lee, asociate director of credit research at Peregrine Fixed Income, said: 'The rating was fair, considering the size of the company. It is also an endorsement of its strength among listed companies.'