Moody's cautioned investors over Hutchison-issued bonds
Moody's assigned A3 rating.
Moody's Investors Service has today assigned an A3 rating to the US Dollar denominated five and ten year notes which are to be issued by Hutchison Whampoa International (12)(II) Limited, and irrevocably and unconditionally guaranteed by Hutchison Whampoa Ltd ("HWL").
The outlook for all ratings is negative.
RATINGS RATIONALE
"Moody's anticipates that the proceeds of the bond will be used primarily for the refinancing of debt due in the next year and will therefore be leverage neutral; however the refinancing of such debt will serve to term out the debt maturity profile which is credit positive," says Laura Acres, a Moody's Senior Vice President.
"The A3 rating reflects HWL's broad degree of business and geographical diversification, and the fact that most of its established businesses
command strong competitive positions in their markets and generate stable cash flow," says Acres, also Moody's Lead Analyst for HWL, adding, "HWL
also maintains a strong liquidity profile."
"These strengths are counterbalanced by HWL's financial metrics which remain weakly positioned for the rating level however, there has been a
moderate improvement in financials which Moody's anticipates will continue. By end-FY2012, for example, adjusted funds from operations (FFO)/net debt of about 15.5% in the last twelve months ended on June 2012 could move marginally closer to 20% by year-end in part due to accounting treatment of the various hybrids and improving FFO contributions from key business units, particularly the 3 Group," adds Acres.
It is also Moody's expectation that HWL's book leverage could mildly improve and achieve the unadjusted net debt to capitalization ratio of
mid-20% targeted by management.
HWL's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i)
business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected
performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes
against other issuers both within and outside HWL's core industry and believes HWL's ratings are comparable to those of other issuers with
similar credit risk.
HWL is one of the largest Hong Kong-based conglomerates with a strong presence in Asia and Europe. Its six core businesses are: (1) ports and
related services; (2) property and hotels; (3) retail; (4) telecommunications; (5) energy; and (6) infrastructure.